Volume Analysis | Flash Market Update – 6.24.24

And Then They Were None

It was a dull, short week in the markets last week, at least from a price perspective. Yet under the silent surface, something significant may be brewing. The S&P 500 closed up a modest 0.76%, while the lagging troops (iShares Russell 2000 ETF, IWM) finished up 0.82%. However, our leading generals (NDX 100) just barely squeaked out a gain of 0.11%.

Although the S&P 500 price index was mildly up, S&P 500 Capital Weighted Volume and Dollar Volume both blew their lids off. Weekly S&P 500 Capital Weighted Dollar tallies hit 3+ year highs not seen since the historic pandemic bottom. Keep in mind, this was all accomplished on a shortened four-day week. However, this time the dramatic action was not led by the bulls. Downside weekly Capital Weighted Dollar Volume overwhelmed Upside $131 Billion to $56 Billion. On Thursday, the bears nearly scored a 90% thrust day, falling just short with 86% of the volume closing to the downside on very heavy dollar volume. On Friday, the Capital Weighted Dollar Volume was even stronger with approximately 80% again to the downside.

My previous experiences observing such remarkably high downside Capital Weighted Volume corresponding with subdued prices could possibly be viewed as an omen of change. For example, similar immense downside Capital Weighted Volume behavior accompanied by only modest price change occurred just a few weeks prior to the Flash Crash.

While the upward trend of both Capital Weighted Volume and Dollar Volume remains strong, this week’s action put in damage not recorded since 2022’s Q3 correction. However, the fall of 2022’s Q3 Capital Weighted Volume trends correction was primarily driven by falling prices as opposed to heavy downside volume tallies.  While volume took a big one on the chin this past week, market breadth as represented by the Advance-Decline Line bounced off support for a mild weekly uptick.

Seven Nephilim were in the mix; one choked itself and then there were six. The S&P 500 finished this week up over 14.57% for the year. As heavily discussed in financial media, this performance has been largely driven by a few mega caps known as the Magnificent Seven. In contrast, RSP, the Invesco S&P 500 Equal Weight ETF, is only up 5.37%, SCHD, the Schwab US Dividend Equity ETF is up 3.41%, and IWM, the iShares Russell 2000 ETF is up only 0.35% year to date.

Although the Nephilim enjoy their day in the sun; now they are led by just one. The mega caps are consuming the vast majority of the S&P 500’s capital inflows, leaving the rest of the S&P 500 index members fighting for table scraps. Of these titans, Nvidia (NVDA) has emerged as the new mega cap leader. However, leading into this week’s decline, NVDA’s VPCI (Volume Price Confirmation Indicator) and VPMCI (Volume Price Momentum Confirmation Indicator) both recently gave indications of volume price contradiction. Additionally, Thursday NVDA experienced a bearish engulfing pattern in its price chart. This Japanese candle is thought to signify exhaustion that may precede possible price reversals or a pause in the bullish trend.

Overall, led by the powerful generals, the price trend and capital flows of the markets remain strongly up. However, lingering under the surface, a new movement may be in development. What this development could be we just don’t know. The meaning, if any, is yet to be determined.

Grace and peace my friends,

BUFF DORMEIER, CMT®

Updated: 6/24/2024. Historical references do not assume that any prior market behavior will be duplicated. Past performance does not indicate future results. This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. Investment advisory services offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser.