Volume Analysis | Flash Update – 3.3.25
Failing momentum or is a powder keg brewing? Part 2
The battle between the bulls and the bears is now hot and heavy. This past week several of our market forces retreated back to their original front lines on heavy volume where they found significant reinforcements awaiting. The S&P 500 breached its rising 5900 trendline support line on Thursday, the 27th, only to rally back above it again on Friday.
Likewise, the generals, Invesco QQQ Trust (QQQ), and the troops, iShares Russell 2000 ETF (IWM), both flirted with their support levels, 500 (QQQ) and 210 (IWM). Both bounced back strongly Friday, holding the front lines. The generals took the highest casualties on the week, falling -3.51%, followed by the troops, down -1.53%, with the capital weighted SPDR S&P 500 ETF (SPY) retreating -1.09%. Once again, as pointed out in last week’s report, our middle platoon brass commanders held firm. The Invesco S&P 500 Equal Weight ETF (RSP) finished the week slightly up 0.10% and the Schwab US Dividend Equity ETF (SCHD) maintained their advance, up 1.06%. With two months into the year, the troops and generals both find themselves in retreat (-2.88% and -0.63% YTD, respectively), whereas the brass commanders, the equal weight and dividend stocks continue their march up field (2.79% and 4.32% YTD, respectively).
The week exhibited heavy action with both the bears and bulls calling up heavy forces onto the battlefield. Total downside and even upside Capital Weighted Volume finished the week higher than average with 65% of the volume to the downside. Capital flows were also above average, with above average capital inflows, outflows, and total flows on the week. Although Capital Weighted Volume and Dollar Volume remain in uptrends, both are beginning to weaken towards support. Meanwhile, market breadth as observed in the action of the NYSE Advance-Decline Line rallied off its bottom to close slightly higher on the week, establishing better footing.
Zeroing in on the daily battles, Thursday the battle ended with S&P 500, QQQ, and IWM all pushed back to the brink of their last stand defensive positions. These fortification levels not only held but sprung a massive bullish counter offensive completely overwhelming the bearish operations. On the last day of the month, the upside Capital Weighted Volume and capital inflows surged in strength with the bears almost completely missing in action. Both capital inflows and upside volume completely routed outflows and downside volume to account for over 99% of Friday’s daily volume tallies!
From a volume momentum perspective, IWM’s VMI (Volume Momentum Indicator) reached the extreme overdone daily level of 60 and is also nearing stretched levels on a weekly basis. Similarly, the QQQ’s VMI reached an oversold daily level of 58 and is getting extended on a weekly basis as well. We have previously pointed out these extreme VMI levels as rallying points when occurring in a consolidation range. Additionally, investor sentiment as measured by AAII Bull-Bear Spread has reached extreme lows not observed since 2022’s market bottom. Overall, the bears are leading a valiant charge but now show signs of possible exhaustion at these levels. Meanwhile, the generals and troops have regrouped at their former fortified positions. If these support levels don’t hold, the momentum enjoyed by the bulls since 2023 may sway back to the bears.
Grace and peace my friends,
BUFF DORMEIER, CMT
Updated: 3/3/2025. 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.
