Loss of intermediate tech momentum 'has been weathered really well', says Fairlead's Katie Stockton

Summary

Katie Stockton of Fairlead Strategies reviews the S&P 500's three-month stall, attributing it to large-cap tech underperformance and lost intermediate-term momentum. She sees a likely oversold bounce in mega-cap tech around key support levels, including Apple at 243, Meta at cloud-model support, and Microsoft holding 450, but warns Fairlead's monthly gauges point to a significant Q1 correction. She also says small caps and financials may digest recent gains, with a pullback potentially offering an opportunity to add because year-to-date rotations and the Russell 2000/S&P 500 ratio are constructive.

• S&P 500 has gone nowhere since October and closed below its October intraday high.
• Katie Stockton attributes the stall to large-cap tech underperformance and loss of intermediate-term momentum.
• She says the market has weathered the loss of momentum well, with higher lows since the November low.
• Mega-cap tech is largely oversold into earnings, with Apple at 243, Meta gapping off cloud support, and Microsoft holding 450.
• Stockton expects a brief oversold bounce in mega-cap tech but sees monthly gauges pointing to a significant Q1 correction.
• Key risk levels: S&P 500 around 6720 and Nasdaq 100 around 25,000.
• Russell 2000 and selected financials show short-term upside exhaustion; she sees consolidation or pullback before adding exposure.
• The Russell 2000 versus S&P 500 ratio has reversed a downtrend line from early 2023, supporting the rotation thesis.