Classify each asset's volume regime as accumulation, distribution, or neutral
Answers whether an asset is being accumulated or distributed by tracking money flow. It reads up to 90 daily candles and computes On-Balance Volume with its 30-day slope and 20-day Chaikin Money Flow. When both point the same way it labels the asset accumulation or distribution, otherwise neutral, and rolls the mix into a run distribution. The labels describe volume-weighted flow beside price, not net buying or selling, and the two measures share their inputs, so agreement reduces noise rather than independently confirming a move.
Volume-based accumulation and distribution - two named indicators, both with a specific and teachable weakness.
ON-BALANCE VOLUME (Granville, 1963). A running total: add the day's volume if the close is above the previous close, subtract it if below, leave it unchanged if equal. The idea is that volume precedes price - that accumulation shows up as volume on up days before it shows up as a sustained advance. Two things follow from the construction and both matter. First, OBV uses the SIGN of the daily change and discards its size, so a 0.1% up day and a 6% up day contribute identically. Second, the absolute level of OBV is arbitrary - it depends entirely on when the series started - so only its DIRECTION and its slope carry information, which is why a 30-day slope is what gets read here rather than the level.
CHAIKIN MONEY FLOW (Marc Chaikin). For each bar, compute the money flow multiplier: ((close - low) - (high - close)) / (high - low), which runs from -1 when the close is at the low to +1 when it is at the high. Multiply by the bar's volume to get money flow volume, then sum over 20 periods and divide by the sum of volume over the same 20 periods. Positive readings indicate closes persistently in the upper part of their range on volume.
WHERE CMF IS FRAGILE, and this is worth teaching because it is not obvious. The multiplier uses only the bar's own high, low and close - it IGNORES GAPS ENTIRELY. A stock that gaps down hard and then closes at the top of its (much lower) range scores +1, the maximum bullish reading, on a day it fell heavily. The indicator cannot see the overnight move because the previous close is not in the formula. It is also undefined when high equals low.
THE SHARED WEAKNESS. Both indicators infer INTENT from the relationship between price and volume. That inference has no mechanism behind it: every transaction has a buyer and a seller, and the same volume is recorded either way, so 'buying pressure' is a narrative about a number that is symmetric by construction. What these indicators actually measure is whether volume has been heavier on days that closed up or in the upper part of their range - a real, observable asymmetry, and a much weaker claim than accumulation.
WHY REQUIRING BOTH HELPS A LITTLE. When OBV's slope and CMF agree, two different weightings of the same price-volume data point the same way. They are computed from the same inputs, so this is noise reduction rather than independent confirmation - but their failure modes differ (OBV ignores magnitude, CMF ignores gaps), so agreement does exclude some errors.
The 90-day window, the 30-day slope, the 20-period CMF and the accumulation/distribution/neutral labels are our own convention.
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