Watch for Heavy Volume without Further Price Progress Up

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Watch for Heavy Volume without Further Price Progress Up

What signs should you look for to detect a market top? On one of the days in the uptrend, the total volume for the market will increase over the preceding day's high volume, but the Dow's closing average will show stalling action, or substantially less upward movement, than on the prior few days.

The spread from the daily high to the daily low of the market index may be a little larger than on earlier days. The market average does not have to close down for the day, although in some instances it will do so, making it much easier to recognize the distribution as professional investors sell or liquidate stock.

Normal liquidation near the market peak will only occur on one or two days, which are part of the uptrend. The stock market comes under distribution while it is advancing! This is one reason so few people know how to recognize distribution (selling).

Immediately following the first selling near the top, a vacuum exists where volume may subside and the market averages will sell off for perhaps four days. The second and probably the last early chance to recognize a top reversal is when the market attempts its first rally, which it will always do after a number of days down from its highest point.