SPDR S&P 500: Without thrust, can there be trust?

• U.S. equity index futures suggest opening weakness
• Banks fall on hedge fund default concerns
• Europe STOXX 600 up ~0.1%
• Dollar ~flat; gold down, crude gains
• U.S. 10-YEar Treasury yield ~1.65%

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SPDR S&P 500: WITHOUT THRUST, CAN THERE BE TRUST?

As the end of March nears, the SPDR S&P 500 ETF Trust is on track for a record high monthly close. With this, raw monthly SPY volume is on pace for its highest reading since June of last year.

That said, one measure that incorporates both price and volume, the Money Flow index $(MFI)$, may be casting some doubt over the underlying thrust behind the SPY's record highs:

Recently, in December, on a monthly basis, this oscillator neared the 80 overbought threshold, but it has since backed away, even with the SPY poised for another all-time high monthly close this month.

Of note, since 2007, SPY declines of varying degree have been preceded by protracted monthly MFI divergence. Just in terms of more recent history, despite new SPY highs in late 2018 and early 2020, MFI failed to confirm strength, and in both instances, ultimately, the SPY suffered a major sell off.

Additionally, the 80 barrier may be another issue in itself, because pushing above this level, let alone pegging above it, has proved to be no easy feat for this measure. In the 329 months since readings began in late 1993, the MFI has only ended a month above 80 around 9% of the time. The average reading has been about 58.

Therefore, December's reading, just over 77, may mark another high, and with further deterioration, the SPY may become increasingly vulnerable to another sharp drawdown.