Setting Up The Weak Hands?

The talking heads will soon be selling seasonal strength in US equities. They will likely say ho-ho-ho equities are the way to go as seasonal strength, i.e. the Santa Claus rally approaches.

Be careful of easy logic. Smart money knows that seasonality must coincide with accumulation. They know that seasonality under the veil of distribution is a bull trap.

Are we seeing accumulation or distribution?

The dollar as the best looking horse in the glue factory is beginning to show strength. As long as capital is flowing out of Europe into global safe havens such as the gold and US dollar, the risk-on trade must be considered vulnerable.

Distribution in the Euro and accumulation in US Treasuries confirms the dollar’s strength.

Euro ETF (FXE)


TBonds ETF (TLT)


While US equities have broken out of a well-defined trading range, their move lacks force. This lack of force suggests distribution in what Wyckoff called last points of supply (LPS).

NYSE Composite


As long as distribution persists, the risk-on trade as defined by seasonal strength is vulnerable. That means unless the message of the market changes smart money will setup the weak hands by distributing into strength.