Volume Analysis | Flash Market Update – 9.9.24
And Then There Were None Part X
The generals led the market lower this past week as the capitulation bounce lost momentum. The generals, the Invesco QQQ Trust (QQQ), fell -6.18%, with the troops, the iShares Russell 2000 ETF (IWM), following closely behind, down -5.98%. The rotation trade continued, with the brass outperforming the S&P 500. The SPDR S&P 500 ETF Trust (SPY) dropped -4.43%, while the Invesco S&P 500 Equal Weight ETF (RSP) was down -3.31% and the Schwab US Dividend Equity ETF (SCHD) declined -3.05%.
Capital flows confirmed the bearish price action, starting Tuesday with a 96% downside dollar volume day and closing the week on Friday with a 98% downside day. Thus, the short week was bracketed inside two strong downside volume days. For the week, a massive 79% of flows were to the downside, pushing the trend of capital weighted volume back below its trendline. Although capital volume has broken down beneath trend, both capital-weighted dollar volume and the NYSE Advance-Decline Line remain comfortably above trend.
The troops (IWM) broke through their 212 support level, which now turns into a resistance level with the next support level at 197. More concerning is the S&P 500, which is in danger of forming a double top. A double top is bearish pattern formation occurring when a new high is followed by consolidation, then the ensuing rally fails to surpass the prior high. If the S&P 500 breaks below its August low of 5119, the double top will be confirmed. The next key support for the S&P 500 lies at 5375, with intermediate support at 5100 and major support at 4800. Meanwhile, the generals (QQQ) are nearing support at 440, with more significant support at 410. In summary, led by the generals, the capitulation bounce seems to be fading, while capital flows are rapidly retreating.
Overall, the battlefield of the market has seen a significant shift this week. The generals, once leading the charge, are now in retreat, with the troops following closely behind. Our brass members have shown resilience, holding their ground better than the main forces, but they too have been forced to give up some territory. Most concerning is the potential double top formation in the S&P 500 – a tactical situation that, if confirmed, could signal a major change in the theater of operations.
As we move forward, investors may consider remaining vigilant. The capitulation bounce, the market’s recent counteroffensive, appears to be losing steam. But in the fog of market war, opportunities can arise unexpectedly. Remember, in the markets, as in warfare, it’s not just about winning every skirmish, but about positioning ourselves for long-term victory. Stay alert, stay disciplined, and keep your eyes gazed on the horizon.
Grace and peace my friends,
BUFF DORMEIER, CMT
Updated: 9/9/2024. 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.
