SPY

Understanding Market Dynamics: Institutions vs. Retail
The patterns highlighted above, where high volume lower wicks are located precisely at the $SPY’s largest recorded Dark Pool transactions, followed by larger candles driving price down with reduced volume, offer a window into the relationship between two parties:
Institutional Investors and Retail Participants.

These dynamics form the foundational framework for all the following analyses presented in this newsletter.

Institutional Investors
High Volume Lower Wicks at Dark Pool Levels:
The Dark Pool is a private exchange where institutions execute large block trades away from public exchanges, allowing for anonymity and minimized market impact (slippage).
 
The extremely high volume lower wicks at the SPY’s largest dark pools on record—$399.95, $395.88, & $441.84—indicate very significant buying interest from institutional investors.

Retail Participants
Larger Candles Driving Price Down With Reduced Volume:
Following these institutional accumulations, the significant price drop with reduced volume indicates that the institutional investors who just accumulated, did not sell off their recent acquisitions; rather, it was retail participants who sold.

Paraphrasing Warren Buffet,
“The stock market transfers money from the active to the patient.”
The market dynamics illustrated serve as visual evidence & proof of this principle in action.

Fun fact: The April 2022 candle ranks as the $SPY’s second largest monthly candle ever recorded. Remarkably, this occurred on decreased volume amidst significant institutional accumulation.
I believe this demonstrates just truly unique and unprecedented the current market environment is.

Based on my Dark Pool Fibonacci projection, I conservatively estimate a long-term price target, as a result of the institutional accumulations outlined above, as high as $730

The last thing I want to note about my long-term analysis for SPY:
You might have observed that since price surpassed the Dark Pool accumulation threshold at $441.84, it has progressed higher on steadily decreasing and generally below average-volume.
In fact, in June, $SPY traded it’s lowest volume in over two decades.

This simply indicates minimal activity from institutions, who, in line with Warren Buffet’s philosophy, take a passive approach to investing, simply holding the shares they recently accumulated.

As we progress through this newsletter, you will see that instead of buying more of the $SPY itself, institutions are now focused on rotating funds into specific sectors, increasing overall market breadth, and therefore the sustainability of the current rally.

Before we move, here’s some short-term analysis on the $SPY

When I look at the weekly chart, I see predominantly bullish volume and a tight candle formed last week just below ATH’s, certainly favoring a potential upside breakout rather than a rejection.

Notable Options Flow

This whale positioned themselves LONG $SPY before the EOD ramp into close on Friday…
With about a month of time left on this, I think there’s a good chance they held through the weekend and are looking for this upside break on the weekly time frame.

Dominant lower wicks on volume.
Friday’s candle closed near session highs signaling strength and even engulfed Thursday’s candle.
Surely this sees short-term continuation come Monday.

I want to point out, there aren’t any large dark pools up here.
AKA no reliable support if momentum were to fail.
I think it’s key to keep risk tight here as $533.80 is the nearest DP support, and that’s visible only on the 4HR and below.
$522.14 remains the closest HTF DP (weekly)

Here are the high impact US economic data releases for the week that may impact the short-term fluctuations of the $SPY -
As well ass the most anticipated earnings reports for the week.

Now, lets get into the good stuff.

XLK

The Technology Sector

Most people are unaware of a very significant historical event that occurred in the the financial markets during the 2020 market correction:
The $XLK experienced it’s highest level of institutional investment in history.

This influx of capital into Tech stocks during a time of severe economic uncertainty highlights not only the sector’s resilience, but also its allure as a growth engine amidst economic volatility.
Tech is here to stay, and there is no “bubble”.

This unprecedented surge in investment explains why the technology sector as been at the forefront of the recent stock market rally.
Even throughout the 2022 pullback, institutions continued accumulating this ETF.

It’s notable that even on last month’s small pullback far away from prior ATH’s, we already see long-term accumulation continuing.

However, uptrends are becoming significantly stronger elsewhere in the market, and my current short-term focus is there, not on tech.

XLF

The Financial Sector

Emerging from a multi-year institutional accumulation,
The $XLF spent an entire quarter compressing over it’s prior ATH

In the last two months, it appears a decisive breakout, retest, and bounce has occurred, confirming a strong uptrend is present.

I am fairly certain that my long-term projection on the $XLF of just $54.90 is wildly conservative. Here’s why:

The financial sector is demonstrating significant resilience by breaking through, retesting, and prior highs from before The Global Financial Crisis. This suggests a very robust recovery taking shape and the potential inception of a never before seen long-term growth trend.

XLV

The Health Care Sector

The $XLV presents a particularly compelling narrative of enduring strength and long-term growth potential.

I am struck by the recurring pattern of significantly high volume lower wicks during each market correction.
I also notice the recovery following each accumulation is so fast which makes the recent two-year price compression that is currently breaking out, very unique.

I believe the upside expansion we’re about to see in Health Care on the higher time frame will not be comparable to any move seen before.

I think my projection of $172.80 is almost laughably conservative.

XLY

The Consumer Discretionary Sector

The $XLY experienced it’s largest institutional investment in recorded history during the 2022 correction.
This is the fourth largest sector within the $SPY and has significantly underperformed the broader index during the recent rally.

The awakening of this sector will have a profound impact on overall market breadth.

This chart alone serves as extremely compelling evidence that the market is far from reaching the peak of it’s current bull trend.

The lag of the $XLY can be attributed to it’s inherent nature as one of the most economically sensitive sectors.
It is cyclical, meaning it’s performance is heavily tied to the overall health of the economy, which as portrayed by the media, remains in a perpetual state of uncertainty.

In a time of pervasive pessimism, institutional investors displaying a never before seen level of confidence in long-term economic growth is absolutely not something to ignore.

This time frame further punctuates the institutional accumulation that has occurred off this ETF’s largest DP’s on record—$175.80-$183.09

At this point in the newsletter, I trust you are beginning to grasp the reality that the bull market’s true ascent has yet to commence.
This awareness presents plenty of time to strategically accumulate long-term investments. It is not something that should overwhelm you.
It should honestly be calming, because the best is yet to come.
If my analysis is correct, the bull market will last YEARS.

XLC

The Communication Services Sector

The $XLC, another key sector ETF within the $SPY, has also seen historic levels of institutional investment over the last few years.

There is extraordinary long-term growth potential in this sector.

It is sitting just over it’s prior ATH’s showing explosive potential, and once again, enforcing the idea that breadth is about to drastically improve in the market, and truly kick-off the bull-run.

XLI

The Industrial Sector

The $XLI may not display historic levels of accumulation, but it shows remarkably precise and consistent institutional accumulations over the past few years. Institutions love this thing.

This ETF actually just recently saw substantial Dark Pool activity at the $125.64 level, something not seen on the sectors outlined above.
After a four month price compression at this DP, it appears we are seeing a strong breakout move beginning:
Last month’s price action formed a “resting candle” on decreased volume just above support, after breaking over on increased volume—
a pattern that often leads to very healthy upside continuation, provided the support level remains intact.

The Daily chart shows that during this multi-month price compression institutions have actively accumulated the $XLI

This is yet again, a notable sector within the $SPY that is just beginning a major breakout.

XLP

The Consumer Staples Sector

The $XLP is another sector that just recently seen it’s highest level of institutional investment in it’s entire history.

Despite this unprecedented level of accumulation, price has been sideways for over three years with no clear trend.
Until now.

This month’s candle just closed at it’s highest level ever on increased volume, establishing a bullish trend for the first time in years.

I actually wrote a “spotlight” newsletter on this a few weeks ago
Here

In that newsletter I outlined an extremally powerful 10+ week compression over the exact dark pool that saw the historic institutional accumulation two years ago. It is playing out perfectly thus far.

I think this is one of the most powerful sector rotations at the moment.
This should be the start of an uptrend that lasts multiple years.

XLE

The Energy Sector

The $XLE is a truly unique chart.
For almost two decades, institutions have consistently invested into the Energy Sector. Notably with absolutely no prevail against retail sellers.

There have been substantial accumulations off the lower Dark Pools—$52.38-$57.51 where during the 2008 market correction, institutions acquired the most shares since the ETF’s inception.

This chart best illustrates the extended period of consolidation this sector is experiencing.

What we’re seeing in the last four years very notable.

After double topping in 2014, price broke to lows not seen since the 2008 crash. Massive volumes (institutions) immediately stepped in and reversed price at a speed never seen before.
2022 was the largest yearly gain the $XLE has ever seen.

Since that robust recovery, price has been consolidating inside the prior double top resistance on decreased volume… “breathing” for it’s next big move…

The monthly chart shows a textbook ascending triangle pattern, which favors upside continuation if resistance can be broke.

A convincing breakout from this pattern could lead to a WILD long-term rally in the $XLE sector.
Definitely the most unique and long-term chart I have shared thus far.

XLU

The Utilities Sector

The $XLU, similar to the $XLK, this saw it’s highest institutional investment ever during during the 2020 market correction.
Why hasn’t this been a market leader as well then?
This is where you can start to understand how important market cap and weight in the S&P500…
While the $XLU saw historic accumulation in 2020, it is less than 3% weight in the $SPY and has a substantially lower market cap than the $XLK sector, which means just an overall smaller amount of money invested here.

Anyways,

After lagging for a long time,
Only recently has a strong uptrend developed in Utilities, in anticipation of decreasing interest rates.
Price is now approaching it’s largest DP on record.

Truly textbook institutional accumulation patterns.

Once $76.63 is cleared, there is a lot of upside potential for this sector over the coming years. Careful below resistance in the short-term!

XLRE

The Real Estate Sector

This $XLRE saw it’s largest institutional investment ever during during the 2020 market correction. Some of the individual names in this sector are incredible… REIT’s specifically.

Very substantial accumulation off the $41.71-$42.09 Dark Pools back in May of 2022. Price is currently attempting to reclaim this support after finally developing a short-term uptrend in anticipation of lower interest rates after lagging the $SPY for months on end.

XLB

The Materials Sector

The $XLB has seen amazing institutional accumulation, now coupled with with a classic technical price formation, The Cup & Handle-
Poising this for significant long-term upside potential if this DP cluster can remain support. I think this is a very unique setup and like real-estate, some individual names here look incredible.

RSP

The Equal Weight ETF for the $SPY

Analyzing this ETF is crucial as it provides a more comprehensive view of the broader market’s health.
Unlike the $SPY, which can be disproportionately influenced by a few mega-cap stocks or a specific sector, the $RSP ensures that every stock within the S&P500 is accounted for equally.

Concluding my newsletter with insight to this sector beautifully underlines and tops off the notion that the bull market we are currently experiencing is not only continuing, but just beginning, with wide-spread participation across all sectors.

Over the last three years, this ETF has experienced truly remarkable institutional investment, the most astonishing aspect being the continued escalation of accumulation during the last year’s rally.

During the recent period of consolidation over prior ATH’s , we even saw the largest Dark Pool transaction in recorded history @ $167.11
Very similar to the $XLI I might add…

With a high volume breakout over this level, followed by a reduced volume “resting candle” , I am convinced this is confirmation of massive broader market participation about to ensue.

This is the true dawn of the bull market.

P.S.
I will be writing about the IWM, KRE, and XBI soon!

Wow. You made it!
I made it! lol
I hope this took you a lot less time to read than it did for me to write.
THANK YOU for digesting my analysis reading my entire newsletter.

Make sure you are subscribed for future newsletters, as I will be writing multiple “spotlight” newsletters diving deeper on the individual names within many of these sectors.
Sign up here.

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