Investors shouldn’t feel the need to chase short-lived relief rallies: Fairlead’s Katie Stockton
Speakers
Katie Stockton -- Fairlead Strategies Founder and Managing Partner / CNBC Contributor
— Fairlead Strategies founder
Summary
- Katie Stockton views the recent S&P 500 bounce as unsustainable, expecting further corrective downside with next support at 6175 and potential for worse.
- She identifies a meaningful long-term breakout in crude oil, with next resistance at $130 (2022 high) and beyond that $147, which historically negatively impacts equities.
- Advises investors to avoid chasing short-lived relief rallies and wait for weight of evidence—like oversold conditions or breadth extremes—before increasing long positions.
- Geopolitical conflicts could be prolonged, exacerbating market instability and oil price shocks, with credit spreads having widened.
- Bitcoin is in a prolonged basing phase with support at $58,000-$59,000; moves up to $67,000 may be short-lived due to a cyclical downtrend.
- Gold is at the beginning of a potential long-term trading range, requiring signs of downside exhaustion before a bullish move.
- 10-year Treasury yield is range-bound with next resistance at ~4.75% and support near 3.93%; a breakout above 4.20% could catalyze higher yields.
- Technical indicators suggest about four weeks of stabilization this month but lack oversold upturns or sentiment extremes for a sustained rally.
- She emphasizes that price action (technicals) often leads fundamental developments, even in exogenous events like geopolitical shocks.
Trade Ideas
Katie Stockton explicitly stated that the recent S&P 500 bounce is not sustainable, it's an interruption to the corrective phase, and she could see it getting worse than the next support at 6175. Overbought conditions are being rectified by a breakdown in bullish momentum, and lack of oversold upturns, breadth extremes, or sentiment leadership suggests no major low is in place. Avoid chasing brief relief rallies and wait for evidence of stabilization before getting aggressively long, as the corrective phase is likely to continue. A quick resolution to geopolitical tensions or stronger-than-expected fundamentals could reverse the corrective phase and lead to a sustained rally.
She said crude oil had a real breakout before the war, calling it a meaningful long-term turnaround, with next resistance at $130 (2022 high) and beyond that $147. The breakout supports further upside, and historical oil shocks have duration that can negatively impact markets and the economy. Long-term bullish on crude oil due to the technical breakout and potential for higher prices, which could exacerbate equity market headwinds. Geopolitical de-escalation, such as a ceasefire or strait reopening, or demand destruction could halt the rally.
She identified Bitcoin support at $58,000 to $59,000, said moves up to $67,000 could be short-lived, and described it as a prolonged basing phase with a cyclical downtrend. The dominant feature on the chart is a cyclical downtrend, and lack of oversold uptrend suggests retests of support are likely before a full recovery. Watch for signs of a base forming and monitor support levels closely, as the asset is in a consolidation phase without clear bullish indicators. A break below the $58,000-$59,000 support zone or failure to establish a base could lead to further downside.
She mentioned that gold is at the beginning of perhaps a long-term range and is looking for signs of downside exhaustion. Demark indicators suggest a long-term range, so within that context, monitoring for exhaustion signals is key to identifying entry points. Watch for downside exhaustion to potentially enter a long position, as gold is not ready for a sustained move yet and may trade within a range. Gold could break out of the range unexpectedly—either up or down—without clear exhaustion signals, leading to missed opportunities or losses.
