CHIEF TECHNICAL ANALYST, BUFF DORMEIER, CMT^Ⓡ

Last week we began our new series describing the shifting internals of the two U.S. stock markets. Market One is the capital-weighted S&P 500, largely carried by the ten largest mega-caps AKA the Nephilim. Market Two is the other 490 stocks of the S&P 500 along with the broader ranks of U.S. equities.

Since Q4 2022, Market One has marched in a strong bull advance, powered primarily by the AI-fueled surge of the generals. Meanwhile, Market Two plodded more modestly, with equal weight inching higher and small caps stuck in sideways trenches. That imbalance inspired our And Then There Were None series, July of 2024 where the dominance of the few began to show signs of slowly unraveling.

Now, August 2025, appears to challenge those entrenched lines but in a different way. As we described last week:

“Thus, the market stands at a crossroads. The troops rally with renewed strength, suggesting a new hope. Yet the generals hang suspended in silhouettes of doubt, evoking the chill of a gathering storm. Whether this proves the dawn of a broadening advance or the prelude to further attrition remains uncertain. Nonetheless, both bullish shofars and bearish warnings have been posted for those seeking to understand the signs of the times.”

This week those themes extended. The generals (Invesco QQQ Trust, QQQ)) retreated another -0.27% on above-average downside S&P 500 Capital Weighted Volume and capital outflows. By contrast, the troops (iShares Russell 2000 ETF, IWM) advanced +0.14%. Much of the market was flat: SPY slipped -0.01%, the brass commanders (Schwab U.S. Dividend Equity ETF, SCHD) eased up 0.01%, and the lieutenants (Invesco S&P 500 Equal Weight ETF, RSP) pulled back the most at -0.46%. Even as the S&P 500 notched a fresh intraday all-time high on Friday, it closed the week near its lows, with capital-weighted outflows and downside volume leading inflows 57% to 43%. Meanwhile the accumulation uptrends of both Capital-weighted Volume and dollar volume remain well above price but unlike price are now shifting downward.

Adding to the drama, Nvidia (NVDA), the leader of the Nephilim, reported earnings this past week. We warned that “the delta between price action and volume momentum could prove pivotal.” Post-earnings, that slightly bearish delta widened: NVDA’s RSI now hovers at 50 while MFI has slipped under 40. Moreover, the generals failed to make a higher weekly high for the third straight week, even as the troops posted higher weekly highs for three weeks in a row. Breadth, our troops tell, offered little clarity, with the NYSE Advance–Decline line trapped inside last week’s range.

This battlefield imagery captures the tension: on one side, the troops pressing higher, suggesting a new hope for broader market participation. On the other, the generals show fatigue, their silhouettes forming the outlines of a gathering storm. Whether the storm breaks or the dawn widens depends on the future flows of capital deployments.

As in past campaigns, markets often whisper their warnings before shouting them. A tactical investor must listen carefully. Today, the whisper suggests that hope and storm clouds coexist. Disciplined, risk-managed strategies are not optional rather they can be essential. They may help defend portfolios when the storm inevitably arrives, while still leaving open the opportunity to advance should hope abound.

Grace and peace my friends,
BUFF DORMEIER, CMT®

Updated: 9/2/2025. 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.