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Accumulation/Distribution Profile Buy Signal The accumulation/distribution profile indicator aims to pinpoint important stock market trend reversal points by tracking price and volume characteristics of the major stock indexes. No trend can hope to run for very long without the big money institutional investor acting in unison in-line with the trend, just as no major counter-trend move and threatened trend reversal succeed - and stick - while the major investment houses are putting their big money to work in the opposite direction. A buy signal for the accumulation/distribution profile indicator is generated when two high volume rally days occur in a one to two week span after the stock market has been in sell-mode for a prolonged period of time. A high volume rally day is classified has a 2%+ move from one days close to the next, with volume higher on the rally than was seen on the preceeding day. The second of the two high volume rally days is more important than the first, since solitary up days are more prone to failure without a clear high volume follow-through. Think of the first 2%+ high volume rally as the 'set-up' for a potential bullish change in trend, with the second 2%+ high volume follow-through day confirmation that the bulls have regained control of the trend as the bears cover their short positions en masse, especially if the high volume follow-through occurs within five to seven trading days after the initial 'set-up' move. Follow-throughs occurring longer than ten days behind the first are more prone to failures. The chart below shows the accumulation/distribution profile indicator buy signal for the NASDAQ that occurred in early 2003 following the great multi-year bear slide that began three years earlier. Early 2003 saw the NASDAQ struggling to surmount upside resistance of its 200 day moving average (blue line in the chart,) with a modest up-tick in down-side volume seen as the index broke below the moving average (to the left of the chart.) Volume, as often is the case near important bear market and corrective bottoms, began to dry up in early February, 2003, as the index continued to fall towards important support. This was the first clue that big money institutional investors were no longer interested in selling their favorite stocks and that a turnaround was in the offing. The first major rally attempt occurred around the 15th February, 2003, with two back to back advances of sufficient magnitude to seal a close above the 20 day moving average (yellow line in the chart.) Volume, however, on both up days failed to eclipse the level seen on the preceeding down-day. Repeat: A buy signal for the accumulation/distribution profile indicator requires two high volume 2%+ rally days in a one to two week span. Thus, it was no surprise that the rally attempt around the 15th and 18th of February failed to secure a lasting breakout. Indeed, the NASDAQ retraced all of the gains achieved on the rally attempt over the following two to three weeks. A careful study of the volume characteristics during that retracement shows that upside volume was higher than was seen on the down-days, which shows underlying strength of the index, despite steadily losing ground. March 12th, 2003, proved to be a key reversal day, when the index broke to new lows intra-day, only to reverse and close higher on heavy volume (to the right of the chart.) The next day saw the NASDAQ gap up and rally strongly on even heavier volume, as the index closed across the 20 day moving average. That 5% move, on heavy volume, marks the 'set-up' for a potential new accumulation/distribution profile buy signal, with a 2%+ high volume follow-through day required to land anytime over the next one to two weeks to trigger the new buy signal. In March, 2003, the NASDAQ did not keep traders waiting long for the second high volume follow-through day, securing a 4%+ rally two days after the first. Volume on the follow-through move was nearly 2 billions shares - the highest volume in over 3 months - and enough to secure a close across the 200 day moving average. That accumulation/distribution profile indicator buy signal proved to be the pivotal moment in 2003 for traders, with the NASDAQ enjoying a 55% rally over the following ten months after the new buy signal was issued, with many stocks going up many times that. Accumulation/distribution profile indicator buy signals stay in effect until an accumulation/distribution profile indicator sell signal is issued.

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