Volume Analysis | Flash Market Update – 8.24.26

Broadening Holds While the Generals Take Some Fire

The year began with a first-quarter selloff in which price weakened more than volume. That distinction mattered. While the S&P 500 price trend broke in late March, Capital Weighted Volume largely held its corresponding trend, suggesting institutional sponsorship had not abandoned the field. April then delivered a rally from oversold conditions with decent participation from institutional capital. May and early June extended the momentum, but volume began to dry up. That was the phase we described as a FOMO rally, with retail investors chasing the artificial intelligence trade after largely missing the sharp post-tariff tantrum V-bottom recovery a year earlier.

The institutions did not fully join that party, but for a while they did not crash it either. That changed in late June, when we saw heavy selling into strength, including the largest downside volume week in market history. As discussed in the Second Half Volume Analysis Outlook, heavy downside Capital Weighted Volume and record Capital Weighted Dollar Volume outflows are not background noise. They are evidence that liquidity is being redistributed beneath the surface.

After July 4th’s bullish seasonal fireworks, the S&P 500 paused and consolidated, but held 7000 support. August then followed with a beautiful breakout. The missing ingredient was high volume. At the time, we noted that a pause to refresh could be healthy if the pullback developed on light volume. A constructive pullback might include a retreat toward 7500 or even 7200, provided downside volume stayed contained. The bearish case would be a pullback on high and lopsided downside volume, especially given the low-volume rally in May and June and the institutional selling in late June. Add in the seasonally vulnerable August, September, and early October occurring at the epicenter of the Presidential Cycle – midterms with a lame-duck president provides its own reasons for cautious due diligence. In either scenario, volume is our tell.

That brings us to this week’s action. Volume was light, but 66% of capital flows were outflows and 70% of Capital Weighted Volume traded to the downside. This keeps the field report mixed. The bullish argument is that the pullback is still occurring on light volume. The bearish concern is that downside skew is persistent while the market moves into the weaker part of the midterm cycle.

Among the field units, the brass commanders continued to show resilience. The Schwab U.S. Dividend Equity ETF advanced 1.71% and made new all-time highs. That is notable because the brass have been especially firm during weakness. In the prior Outlook call, we identified quality dividend leadership as one of the most encouraging areas of the market, with the Schwab U.S. Dividend Equity ETF breaking out and showing stronger sponsorship relative to the other command units.

The lieutenants, represented by the Invesco S&P 500 Equal Weight ETF, declined only -0.50% and held within the prior week’s range, forming a mild doji of indecision. The troops, represented by the iShares Russell 2000 ETF, fell -1.69%, but also remained largely within last week’s range. The generals, represented by the Invesco QQQ Trust Series 1, were the weakest division, falling -2.44%. They broke containment beneath last week’s lows, but remain well above the critical 685 support level.

That 685 level remains important. In the Second Half Outlook, we noted that the generals needed to rally back above 685 after breaking short-term support. Intermediate support sits near 600, with critical support near 550. For now, the generals are wounded, not routed. NVDA, the Nephilim’s champion, reports earnings this week and could determine the generals’ near-term destiny. If QQQ holds above 685, the broader campaign remains intact. If that line fails, the battlefield becomes more dangerous.

Market breadth gave up some ground but held above near-term support. This is important because breadth remains the bright spot in the 2026 campaign. The broader market has been moving from our “And Then There Were None” framework toward “And Then There Were Some,” with more stocks participating even as mega cap leadership becomes less dominant.

The campaign no longer appears dependent on one elite command. Rather than being pulled higher by the generals alone, the advance is now being supported by a stronger core across the broader ranks. That is the essence of the broadening thesis. A market led only by artificial intelligence narratives can be fragile, but a market supported by semiconductors, infrastructure, equipment, dividend discipline, small caps, equal weight participation, and broader capital formation sends a healthier message.

This same theme is reflected in VFGU positioning. The Q3 VFGU investment rationale emphasizes broader leadership, improving market breadth, dividend growth, international participation, quality companies, and diversified factor exposure. It also describes the posture as fully invested, diversified, and disciplined, while maintaining risk controls should the Volume Factor Risk Overlay detect meaningful deterioration.

Energy and technology continued their yin and yang dance. The Energy Select Sector SPDR Fund XLE advanced 2.79%, while the Technology Select Sector SPDR Fund XLK fell -3.53%. This relationship has been a central theme in recent months. In the Outlook, we noted that energy and technology have formed an inverse relationship in 2026, with war headlines supporting energy and peace talk optimism favoring technology.

Recent reporting continues to show a fragile Iran backdrop. Earlier in August, U.S. and Qatari officials reported progress toward a ceasefire framework and a reopening path for the Strait of Hormuz, while Iran and Oman also reportedly discussed shipping route coordinates. More recent reports, however, point to stalled negotiations, renewed tensions, and continued U.S. pressure around Hormuz and sanctions. In military terms, the energy front is not at peace. It is rotating between ceasefire hope and supply risk.

Oil continued its steady march higher, closing near the midpoint of its broad 120 to 70 range. This reinforces the idea that energy remains a potential hedge when the generals are under pressure. In the Outlook, we noted that if the stock market weakens, energy stocks may represent a way to hedge some of the risks.

Both gold and silver rallied together once again. Silver is nearing short-term resistance between 70 and 73, while gold faces resistance near 4700. The move in precious metals appears to be supported in part by the weaker dollar, which broke through its first level of support. Silver remains particularly important because it is not only a precious metal, but also a critical industrial metal tied to artificial intelligence infrastructure.

Overall, this week fits the transition tape described in the Outlook. Leadership is rotating. Dispersion remains high. The market is not simply bullish or bearish. It is sorting. The better question is not whether the market is up or down, but where participation is improving, where volume is confirming, and where price may have run ahead of sponsorship.

The bullish case remains that the pullback is occurring on light volume, breadth remains constructive, the brass commanders are making new highs, and the belly of the market is holding. The bearish case is that capital flows remain skewed to outflows, downside volume remains dominant, the trends of capital and volume trail price, the generals are weakening, and the calendar is moving into one of the more, if not the most, difficult stretches of the four-year cycle.

In the spirit of And Then There Were None, the generals are no longer the whole story. The troops are still in formation. The lieutenants are holding range. The brass commanders are leading. The army has not disappeared. It has rotated.

Risk Command

This remains a market for discipline, not complacency. The broadening theme is constructive, emphasizing diversified leadership, dividend growth, quality companies, and reduced dependence on a single narrative, which remains consistent with the current evidence. However, institutional sponsorship is still not strong enough to declare an all-clear.

A disciplined risk management approach remains the proper command posture. Position sizing, diversification, support discipline, and confirmation from Capital Weighted Volume and Capital Weighted Dollar Volume remain essential. The market can pull back constructively if volume stays light and support holds. But if downside volume expands, outflows persist, or the generals lose 685, defensive positioning should take priority over prediction.

For now, the field remains contested. The brass commanders are advancing, the belly of the market is holding, the troops remain in range, and the generals are wounded but above support. The campaign is not broken, but the supply lines require inspection. In markets as in war, the objective is not to win every skirmish. It is to manage risk before it manages you, defend critical ground, and let volume confirm the next advance.

Grace and peace,

BUFF DORMEIER, CMT

Updated: 8/24/2026. 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.