Volume Analysis | Flash Update – 11.18.24

Operation Market Retreat: Post-Election Rally Faces Tactical Pullback

This past week, the markets executed a strategic withdrawal from the post-election offensive, relinquishing a portion of their hard-fought gains. The frontline troops (small caps) and the generals (large tech), who had led the charge during the election week assault, suffered the heaviest casualties during this tactical retreat. Meanwhile, the brass commanders (large caps and dividend stocks), who had advanced more cautiously during the initial push, demonstrated greater resilience in holding their ground.

Battle Report:

Frontline Troops – iShares Russell 2000 ETF (IWM):

Election Week Advance: 8.72%

Retreat: -3.88%

Territory Lost: 44% of previous gains

Generals – Invesco QQQ Trust (QQQ):

Election Week Advance: 5.46%

Retreat: -3.40%

Territory Lost: 62% of previous gains

Brass Commanders:

a. SPDR S&P 500 ETF (SPY):

Election Week Advance: 4.72%

Retreat: -1.99%

Territory Lost: 42% of previous gains

b. Invesco S&P 500 Equal Weight ETF (RSP):

Election Week Advance: 4.46%

Retreat: -1.73%

Territory Lost: 39% of previous gains

c. Schwab US Dividend Equity ETF (SCHD):

Election Week Advance: 3.67%

Retreat: -1.44%

Territory Lost: 39% of previous gains

Internal Intelligence:

Despite the lighter engagement during the election week offensive, Capital Weighted Volume intensified during the retreat, with $27.2 Billion in assets changing hands. Our reconnaissance indicates that while $11.1 Billion of reinforcements flowed in (Capital Weighted Upside Volume), a more substantial force of $14.4 Billion retreated from the battlefield (Capital Weighted Downside Volume).

Capital Weighted Volume sustained significant casualties on the week but maintained its position above the long-term trend line. Capital Weighted Dollar Volume also experienced a setback but with less severe outflows. Our market breadth reconnaissance, as reported by the NYSE Advance-Decline line, indicates a modest retreat while maintaining positions above monthly support levels and well beyond the trend line.

Defensive Strong Holds;

Both the frontline troops and the S&P 500 have established defensive positions just above their trendline support levels. The troops’ next fortified position is at the 228 horizontal support line, while the S&P 500 has established a rising trendline defense at 5850.

The market’s tactical retreat following the post-election rally may demonstrate a strategic repositioning rather than a full-scale rout. While all segments experienced losses, the brass commanders showed greater resilience compared to the more volatile frontline troops and generals. This evidence further supports our previous broadening themes initiated in June. The previous week’s explosive price action on low volume may suggest retail allocations were being withheld awaiting the election outcomes. This past week’s higher Capital Weighted Volume during the retreat suggests that larger institutional forces may be using this opportunity to distribute gains at more favorable prices.

As we move forward, vigilance is crucial. The market’s ability to hold current support levels will be critical in determining whether this retreat is a temporary consolidation or the beginning of a more prolonged defensive consolidation. Investors should remain alert to incoming economic data, geopolitical developments and technical movements that could influence the next phase of market operations.

Grace and peace my friends,

BUFF DORMEIER, CMT

Updated: 11/18/2024. 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.