Update
From our perspective, perhaps the prior week’s most significant development was S&P 500’s Capital Weighted Dollar Volume reaching all-time highs, marked by a notable surge in Capital Flows. Conversely, a potentially concerning development was observed as the Russell 2000 (troops) displayed weakness, diverging from the sustained strength observed in the NDX 100 (generals). However, in a turn of events this past week, the previously lagging troops led all indices, experiencing a 5.43% increase.
During this period, Capital Weighted Dollar Volume saw a breakout, attracting nearly $54 billion in Capital Inflows, while Capital Outflows amounted to less than $35 billion. This influx contributed to a 2.24% rise in the S&P 500 and a 1.99% increase in the generals (NDX 100).
Despite recent fluctuations in the troop’s performance, there may be a positive development on the horizon. The breakout (IWM) bounce against long-term support observed last week may signify the formation of a rare bullish descending triangle. Typically considered a bearish formation, the crucial factor lies in the direction of the move at the apex, whether it’s a breakout or breakdown with high-volume conviction. In the case of IWM, it broke above its downtrend on significant volume. Moreover, this move was substantiated by positive breadth, with the Advance-Decline Line surpassing its previous near-term range.
Looking ahead, S&P 500 resistance resides at 4527 and support rests at 4475. Perhaps more importantly, IWM resistance dwells @ 190 with critical support found at 160.
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