Episode summary
There's a lack of breadth in the markets right now, says Fairlead's Katie Stockton
Summary
Katie Stockton said the market still looks like a bull cycle on the charts, but the tape has become more fragile under the surface. She argued that the recent pullback has been marked by a lack of breadth and fading momentum, even as major indices continue to hold key support levels. In her view, that makes the environment feel tense rather than outright bearish.
She said semiconductors remain the most important leadership group and that the recent downside gaps in the space may have been exhausting rather than the start of a larger breakdown. Stockton pointed to oversold conditions and said some stocks are improving from that reset, which could create a better selling opportunity for investors who want to reduce exposure into strength.
On sentiment, she said the VIX is useful as a transactional gauge but should not be read in isolation. She noted that other indicators, including the Fear and Greed Index and credit spreads, do not yet point to a full bear cycle. On rates, Stockton said the 10-year Treasury has stalled around 5.25% and may stay rangebound for a few weeks before resuming higher, while mortgage rates and other yield-sensitive markets are still adjusting.
Key takeaways
- Stockton said the market remains in a bull cycle technically, but breadth and momentum have weakened enough to make the tape feel tenuous.
- She sees semiconductors as the key leadership group, and thinks recent downside gaps in the space may have been exhaustive rather than a major breakdown.
- Stockton said the VIX alone does not confirm a bear market, and she wants to see broader stress in credit spreads before turning more bearish.
- She expects the 10-year Treasury to stay stalled around 5.25% for a few weeks before eventually moving higher again.
- She said investors can still buy weakness tactically for now, especially if semis remain oversold and then stabilize.
Notable quotes
“YOU LOOK AT A CHART YOU CAN'T ARGUE AGAINST THE BULL CYCLE RIGHT NOW”
“WE KNOW UNDER THE SURFACE IT'S BEEN PRETTY DIFFICULT FOR INVESTORS FOR A FEW WEEKS”
“I THINK IT'S REALLY THE MOST IMPORTANT SEGMENT OF THE MARKET”
“WE USE THE VIX AS A TRANSACTIONAL SENTIMENT GAUGE. BUT WE USE IT ALONGSIDE OTHER INDICATORS”
“I THINK THAT THE EQUITY MARKET IS AS ATTUNED TO THE TRAJECTORY AND VELOCITY OF THE MOVE IN YIELDS AS THE LEVEL ITSELF”
How the episode opens
All right, let's let's look under the hood as far as technicals go. I think we talked lori calvasina was more about fundamentals. I was under the hood too.
But joining us now, Katie Stockton, founder and managing partner at Fairlead Strategies as well as a cnbc contributor. You kind of arrive at some of the same places, which if fundamentals and technicals are in sync, that's kind of. I hope it's not too much in sync where the secular bull continues, right?
Even the cyclical bull is continuing, but with less momentum in some rotation. Is that something.
Yeah. That's accurate. I mean you look at a chart you can't argue against the bull cycle right now.
And yet we know under the surface it's been pretty difficult for investors for a few weeks. And that's very much related to the lack of breath. Right.
So we didn't have great participation. And also the momentum with that fell off a bit for the major indices. So we feel that that could be indicative of a weakening tape.
And yet we still just respect the support levels and our other risk metrics.
So it's been getting better. And people said that all the the favorites didn't go up last week, but a lot of the the also rans had had their day in the sense of improving breath means that the bullish catalysts continue to outnumber the bearish one in the charts.
Well that's what we're seeing. Yeah. So a lot of stocks are rising off of oversold territory. And that comes with improved momentum. So that's what we're seeing from a bottom up perspective. And last week was pretty interesting with all of the gaps down that we saw in the semiconductor space. Sometimes after good declines, which they had mostly seen, those can be exhaustive on the downside.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- market breadth
- market technicals
- market trends
Companies and tickers mentioned
- Fairlead Strategies
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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