Volume Analysis | Flash Update: Return of the Nephilim – 12.23.24
What a thrilling week on Wall Street it was, I could hardly wait to unwrap this week’s data. As a 30+ year veteran of these market skirmishes, I’ve developed a sense for the ebb and flow of market combat. Yet, as any seasoned commander knows, intuition must be backed by hard intelligence – our market data.
As we unpack this week’s intelligence reports, I’m cautiously optimistic, much like a general receiving unexpected good news from the retreating front lines. The market landscape is as complex as a multi-front war, with major shifts becoming apparent like enemy troop movements on the horizon. This week’s dispatch will focus on decoding the volume data – our market reconnaissance. However, the big picture remains incomplete without intel on the Fed and the bond market – the latter potentially being the tail wagging the market dog. That said, when fully understood, the money trail of equities may be one of the best leading indicators of understanding the bond market. We won’t get much into that in this week’s report but I will later address how this all fits and blends together in forthcoming updates. This is not intended to be a teaser. As much as I like to keep you informed at the expense of my weekend, today happens to be the weekend before Christmas and I simply lack the time to give this topic its full due. Thus, the holistic strategic analysis will need to wait, as even volume evangelists need time for Christmas leave.
Our market forces suffered significant casualties this week. The troops (iShares Russell 2000 ETF, IWM) led the retreat, falling -4.54%, followed by our brass commanders. The Invesco S&P 500 Equal Weight ETF (RSP) fell -3.11% and the Schwab US Dividend Equity ETF (SCHD) dropped -2.99%. The generals (Invesco QQQ Trust, QQQ) held up against the bearish onslaught best, retreating -1.98%, bringing up the SPDR S&P 500 Trust (SPY) dropping -2.04% on the week. This is the third week in a row the generals outperformed their small piers, resuming their former strength.
The decline occurred on the heaviest Capital Weighted Dollar Volume of the year. High volume typically confirms price’s direction but there may be reasons to interpret this action differently this time around. Capital Weighted Downside Dollar Volume was exceptionally high, one of the highest weekly prints of the year. But get this, on a more than -2% weekly S&P 500 price decline, Capital Weighted Upside Dollar Volume slightly outpaced the aforementioned downside volume.
Capital Weighted Volume has been our primary market barometer. Capital Weighted Volume was higher than normal but not surging like its dollar volume counterpart. Downside Capital Weighted Volume was just slightly above normal. But Upside Capital Weighted Volume was above average, outpacing downside volume. Thus, Upside Capital Weighted Volume and Dollar Volume both exceeded their downside counterparts. This is stunning given the veracity of the decline.
Thus, amidst the retreat, our volume indicators tell a much different story. Like clandestine reinforcements arriving under cover of night, this covert operation of big money suggests that, like in the rhyme, appearances can be deceiving. Here’s the bottom line – Santa’s sled may be sliding but you may not want to count Santa out just yet. Keep this in mind, when the clearance sale started, the big money went Christmas shopping. And that’s exactly who the bulls want filling their Christmas stockings.
Changing fronts, akin to falling back to a secondary defensive line, market breadth broke short-term support to close just above its intermediate support. Likewise, the troops also broke short-term support at 220 and are once again testing former intermediate resistance at 212, now acting as a second level of major support. The S&P 500, our main battle group, closed right on its trendline, holding its strategic position.
While our broad market forces retreated to key strongholds, the S&P 500 has avoided major technical damage. However, without the benefit of the Nephilim (mega-caps), the broader markets have slipped down to their all-important strongholds. Yet, in the face of market decline, capital does not appear to be fleeing the largest, most liquid assets but rather looking for entry, akin to tactical regrouping before a counteroffensive. Overall, don’t count out Santa Claus just yet as the volume data suggest he might still have some tactical surprises left in his sleigh.
Wishing you a most Merry Christmas my friends!
BUFF DORMEIER, CMT
Updated: 12/23/2024. 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.
