The market finished lower last week, but the story beneath the surface was more constructive than the headlines may have suggested. Indeed, the list of vulnerable units did not expand – and the iShares Russell 2000 ETF (IWM) remained within its range, notes Buff Dormeier, chief technical analyst at Kingsview Partners.
The field units revealed the broader story. The generals, represented by the Invesco QQQ Trust (QQQ), declined 1.6% and closed nearly on the 685 support line. That corresponds with the July 10 and June 12 lows. If the generals continue their retreat, the next support zone sits near 640.
IWM, QQQ, RSP, SCHD (1-Week & Change)
Data by YCharts
But the IWM remained within the June 19 range and above support near 285. Importantly, the troops now lead the generals on a year-over-year basis. That is a notable command shift supportive of our broadening theme.
Overall, the belly of the market held firm. Most importantly, after the massive selling into strength during the final week of Q2, institutions so far appear reluctant to begin a broader liquidation sale. That could matter as we approach the seasonally weaker months of August and September heading into the midterm election period.
In markets as in war, the objective is not to win each and every battle. It is to manage risk before it manages you, defend critical ground, and allow volume to be your trailblazer.
