Showing posts with label Re-Distribution. Show all posts
Showing posts with label Re-Distribution. Show all posts

Friday, August 30, 2024

Re-Accumulation & Re-Distribution Range Patterns | Richard D. Wyckoff

 S&P 500 E-mini Futures (daily bars - May 23-August 30, 2024) — 40 Week Hurst Cycle Trough on August 5th.
Martin Armstrong's DJIA Aggregate topping Week August 26-30 and Panic Cycle Week September 9 - 13.  
US Stock Market Seasonality negative into late October (Jeff Hirsch & Martin Biber).

S&P 500 E-mini Futures (4 hour bars - August 15-30, 2024) — Distribution or Re-Accumulation:
Distribution Schematic #3 in Phase C or Re-Accumulation with Spring Action in Phase D ?
 
   The 4 Phases of Richard D. Wyckoff's Market Cycle:
(1.) Accumulation, (2.) Mark Up, (3.) Distribution, (4.) Mark Down.
The Re-Accumulation process is exactly identical to the Accumulation process. The only difference between the two is the way the structure begins to develop. While the Accumulation range begins by stopping a bearish movement, the Re-Accumulation range begins after the stop of an upward movement. To put it another way: A Re-Accumulation occurs during a longer-term up trend, which will continue in the future. The main street is finally on the right side as well. Inside a Wyckoff Re-Accumulation schematic, buyers are closing parts of their long positions and sellers are joining the market. With the incoming selling positions, market makers can fill new long positions again.

 4 Types of Re-Accumulation Ranges a.k.a. Continuation Patterns a.k.a. Trend Continuation:
(1.) Re-Accumulation after a Decline.
(2.) Re-Accumulation with Spring Action.
(3.) Re-Accumulation after a Shakeout.
(4.) Re-Accumulation with an Uprising Structure.

The 4 Re-Distribution types are simply the opposite (lower 4 schematics):
(1.) Re-Distribution after a Rally.
(2.) Re-Distribution with Spring Action.
(3.) Re-Distribution after a Shakeout.
(4.) Re-Distribution with a Declining Structure.

 Examples of different types of Re-Accumulation Patterns in the Apple (AAPL) Weekly Chart.
 
The events and phases are still the same (see the Accumulation and Distributions Schematics - the last 4 charts). Only the beginning of the Re-Accumulation cycle is different and equals the start of a distribution cycle. Take a look at the Wyckoff distribution schematics below for the occurring events. The main events that differ from an accumulation or distribution cycle are the occurrences of the Creek. The Creek is a small trend over time and can equal a smaller consolidation. The Creek builds liquidity on both sides of the market and misleads market participants. The Jump Across the Creek (JAC) is the event that causes the SoS. The Jump Across the Creek does take out previous resistance lines with a strong up move. The Jump Across the Creek can also occur inside the trading range of the accumulation. The Creek can be the horizontal resistance defined by Phases A and B or an internal trend line that formed inside Phase B.
  • After the spring and test events, there is a bullish price move with momentum. This is called the Jump Across the Creek. Price continues with a bullish Phase E.
  • Usually, any shakeout and/or decline action before Re-Accumulation will have a local smaller distribution pattern (cause and effect).
  • The Initial Shakeout/Decline is less pronounced during Re-Accumulation than before Accumulation.
  • Volume: Re-Accumulation usually has less supply than Accumulation.
  • The maximum swing of trading range (highest to lowest point): Re-Accumulation trading range is usually tighter compared with an Accumulation trading range.
 (1.) Re-Accumulation after a Decline
 
  • Weakest among the Re-Accumulation types.
  • Decline usually starts from a small local distribution pattern.
  • It can have different variations of the trading range (see the structure of the next 3 formations).
(2.) Re-Accumulation with Spring Action
 
  • Flat or sloping down formation.
  • It can potentially have a few lower lows with a spring being the lowest point of the trading range.
  • Leading stocks can exhibit short-term weakness after strength in this formation.
(3.) Re-Accumulation after a Shakeout
 
  • Absorption of supply happens in the trading range without violation of support.
  • Usually and depending on a position of the market, this pattern exhibits strength.
(4.) Re-Accumulation with an Uprising Structure 
 
  • Re-Accumulation with an Uprise is the strongest Re-Accumulation type.
  • This structure will exhibit higher highs / higher lows.
  • Sometimes can be confused with a topping trading range (Distribution).
 
 
 Accumulation Schematic #1: Phases A and B.

 Accumulation Schematic #1: Phases C, D and E.
 
 Distribution Schematic #3: Phases A, B, C, D and E = the Inversion of the  Accumulation Schematic #1
 
The Re-Distribution occurs inside a markdown cycle and stops a down-trend for a longer period. After bigger price moves even Main Street joins the trend. Now it is time for the market makers to bring the price into a consolidation phase to scare sellers and bring in new buyers. That ensures new liquidity for the institution’s to place new short orders. The start of a Wyckoff Re-Distribution schematic is the same as an Accumulation cycle. A Creek inside the trading range creates liquidity on both sides of the market, which gets taken by a UTAD. Many people will see this as a break-out to join bullish price action, but don’t get fooled. With a Jump across the Creek, the price is not only returning into the trading range but going to continue the downtrend from before.
 
 
  Distribution Schematic #2: Phases A and B.
 
 Distribution Schematic #2: Phases C, D and E.
 
Many believe that simply labeling the events is sufficient for detecting Wyckoff cycles. Don't forget that a supposed Distribution can become a Re-Accumulation or an Accumulation a Re-Distribution. Therefore, it is essential to presuppose a fundamental market analysis and confirm a Wyckoff cycle with COT data, Seasonality, or other longer-term confirmations. Don't make the mistake of looking for Accumulations and Distributions in lower time frames. It is easy to draw a supposed accumulation on a 5-minute chart, but a real Accumulation takes place in higher time frames. Since a Wyckoff cycle takes time to unfold, wait for the events to occur and be fully validated. Otherwise, one quickly get s distracted by the noise within the actual moves and makes bad trading decisions in the worst case. 
 
Posted by at
Labels: , , , , , , , , ,
Subscribe to: Posts (Atom)