medium · Volume Spread Analysis supply-demand-smart-money
According to the principle of 'Market Rotation,' why might a major market index continue to make marginal new highs even after early-cycle sectors like technology have begun their mark-down phase?
- The index is weighted toward the strongest stocks, which are always the last stocks to face professional selling.
- Weak holders in late-cycle sectors panic-sell shares, which perversely drives the broad index higher on the resulting liquidity.
- High volume in the futures market forces the cash index higher regardless of the distribution occurring in individual stocks.
- Professional distribution rotates through sectors, and late-cycle sectors like consumer staples prop up the index while others fall.
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