Katie Stockton Still Sees a Bull Market. So Why Is Her ETF Only 50% in Stocks?

Bitcoin

Across the shows: 4 speakers in other episodes, 1 bullish and 3 bearish calls, past 30 days

• Katie Stockton · Fairlead StrategiesBullish

  A major cyclical low is in place for Bitcoin and crypto; constructive over weeks, not days.

  Fairlead's monthly indicators showed an oversold reading that gave way to improving momentum, so they believe a major low has been established. Broadly, crypto charts show double bottoms and base breakouts. Basing phases are often sloppy and prolonged, but the view is constructive over the next few weeks, though not the next few days, depending on the time horizon and indicators used. Key support and resistance levels are respected and breakouts tend to follow through, so they expect Bitcoin to work higher.

  “we do think that a major low has been established... we're constructive over the next few weeks, but maybe not the next few days.”at 37:14

US stock market outlook

• Katie Stockton · Fairlead Strategies

  Secular and cyclical bull markets remain intact despite breadth concerns; S&P 500 and Nasdaq 100 at new highs.

  She argues the secular bull market is very much alive and mostly well despite breadth chatter, and the cyclical uptrend is also intact. The S&P 500 and Nasdaq 100 just reached new highs on concentrated leadership, which she calls constructive, so the S&P 500 is in pretty good shape even though the tape has been hard to navigate.

  “The secular bull market is very much alive, and I'd say mostly well at this point despite all the chatter right now about market breadth and otherwise. The cyclical uptrend is even also intact.”at 1:53

• Katie Stockton · Fairlead Strategies

  Segments hit by monthly-overbought downturns, led by semis, may not regain June highs despite index strength.

  Long-term overbought conditions are widespread and affect the major indices. Monthly indicators deteriorated over the summer, concentrated in the same leaders that fell during the correction, such as semiconductors. Downturns matter more than overbought readings alone. She is not worried about the S&P 500 or Nasdaq 100 stochastic because they recovered enough to avoid a downturn, but bottom-up segments that saw those downturns give her pause and may not reach new highs versus their June peaks.

  “if we can apply it specifically to the segments of the market that saw those downturns, it would suggest that perhaps they will not be able to reach new highs relative to the peaks that they made perhaps in June.”at 3:32

• Katie Stockton · Fairlead Strategies

  Breadth pullback looks like a correction within an intact uptrend; expects a short-term breadth snapback.

  The cumulative advance-decline line is still in a weekly cloud-model uptrend, and the prior February-March pullback held within cloud support. Short-term oversold readings from the advance-decline line and other breadth metrics point to a snapback in breadth, with minor signs already showing. She notes breadth divergences are poor market-timing tools: they often reverse quickly and don't tell you timing or depth. The pullback could be the start of something worse, but that is not her base case.

  “there is a short term oversold indication from not only that advanced decline line, but then also some of the other breadth metrics that we track that would suggest that we'll see some kind of snapback here in market breadth.”at 5:10

• Katie Stockton · Fairlead Strategies

  Mega-cap concentration fuelled the bull cycle; broader breadth may only come during a weaker tape.

  Narrow leadership in the mega caps is frustrating, but it has been associated with this bull cycle, and it is not a reason to be bearish. Wanting breadth to improve may backfire, because breadth could improve in what ends up being a weaker tape. Everything moves in cycles, and a dramatic breadth pullback and loss of momentum may signal a change, but nobody knows yet.

  “as much as we get frustrated perhaps by that narrow leadership or concentration in the mega caps, it has been associated with this bull cycle... unfortunately, it might actually improve in what ends up being a weaker tape.”at 12:18

• Katie Stockton · Fairlead Strategies

  Tech drives most sector underperformance; utilities and real estate are due relief rallies, so avoid selling there.

  Sector ratios versus the S&P 500 show many downtrends, driven by concentrated tech leadership. Energy outperformed year-to-date on crude oil. Industrials and financials had tradable countertrend moves but are now out of favour. Utilities and real estate look bad on a long-term trend basis but have compelling short-term oversold setups, and snapbacks can be almost violent. For those holding more than they want in beleaguered sectors, she would wait for relief rallies rather than sell.

  “for those that are carrying maybe a little bit of exposure more than they want in some of these beleaguered sectors, I generally wouldn't advocate selling right here right now, but rather waiting for those relief rallies.”at 24:31

• Katie Stockton · Fairlead Strategies

  Communication services can outperform near term, but its long-term upside momentum is fading.

  Communication services is tied to the mega caps and has an opportunity to outperform in the near term. That may not last, because her ratio work shows a loss of long-term upside momentum relative to the S&P 500.

  “communication services, and this is part and parcel with the mega caps, right, has an opportunity right now to outperform near term, it seems. But that's something that might not be lasting given the loss of long term upside momentum.”at 25:00

• Katie Stockton · Fairlead Strategies

  Fund cut to 50% equities, holding treasuries and gold; positioning signals a weakening equity tape into 2027.

  Her tactical sector ETF has shrunk to about 50% equities, with the rest in short-term treasuries, long-term treasuries and gold. These assets tend to outperform in weaker equity environments. She says this positioning hints at a weakening tape for 2027 and that the rules-based system lets the market guide the positioning.

  “our sector positioning has actually just shrunk quite a bit to the point where we have 50% in equities and 50% approximately in other asset classes... So the ETF's positioning and sector rotation would hint at a weakening tape for, 2027.”at 28:58

• Katie Stockton · Fairlead Strategies

  S&P 500 holds near highs only if tech leads, with semis and AI trade driving it.

  Fairlead is very focused on momentum in semiconductors because they believe semis and the broader AI trade are still key to the market. Even if breadth improves and retailers bounce, tech needs not just to perform but to show leadership. Not all mega caps need to lead, but at least about half need to be doing well for the S&P 500 to hold up near its highs.

  “semis and the broader AI trade are still key to the market at this time... It's really tech right now that that needs to not just perform, but exhibit leadership.”at 44:13

International equities

• Katie Stockton · Fairlead Strategies

  Developed-market ratio versus US slipping to neutral-to-lower, led by weakness in European countries.

  The developed global ratio versus the US has deteriorated, mainly due to some European countries. After a decent recovery, that shift is recent. She would posture the ratio as neutral to lower, meaning developed global is performing in line with or worse than the US. Investors need to go country by country to see where the upside and downside are.

  “for developed global, there's been a little deterioration in the ratio looking primarily that's coming from some European countries. And so I would put it probably more like neutral to lower.”at 31:32

• Katie Stockton · Fairlead Strategies

  Japan is in a strong long-term uptrend with no big sell signals she is worried about.

  Japan is a good example of a pretty strong long-term uptrend. Her chart work shows no big sell signals that she is worried about right now. Going country by country, Japan is one of the markets where the upside looks more intact than in Europe.

  “Japan's a good example of a pretty strong long term uptrend and one that doesn't have any big sell signals that we're worried about right now.”at 32:01

• Katie Stockton · Fairlead Strategies

  Emerging markets outperform developed on the tech trade, given heavy Korea and Taiwan semiconductor exposure.

  Emerging-market proxies have shown the tech-sector outperformance across most of the proxies she tracks. The EM ETF has large exposure to semiconductors because of Korea and Taiwan, so its ratio looks better than the developed global comparison. Investors need to check the underlying exposures of these proxies.

  “The emerging markets have really manifested the tech sector outperformance in most of the proxies that we're tracking, like the EM ETF as one, has a pretty big exposure to semiconductors just by the nature of Korea and Taiwan.”at 32:17

Oil & fuels

• Katie Stockton · Fairlead Strategies

  Crude's long-term momentum still points higher since February; $87 support is the downside threshold.

  Crude has formed a large triangle, and the monthly MACD shifted in favour of higher prices in February. Short-term volatility is high, but long-term momentum still points higher. Within the triangle, $87 per barrel is the downside threshold for whether the pullback persists. If support holds, the upper boundary near $105 is the resistance.

  “Long term momentum for crude points higher still. So importantly, I think it was in February that we had that monthly MACD shift in favor of higher crude oil prices.”at 35:50

• Katie Stockton · Fairlead Strategies

  Oil has a good amount of upside toward resistance near $105 per barrel.

  Oil is in a triangle pattern, and the upper boundary is closer to $105 per barrel, implying substantial upside to that resistance. A wide spread between key levels fosters additional volatility, which the speaker sees as something to rely on. The prevailing long-term trend is the most important consideration. The transcript starts mid-discussion, so the wider context is partly missing.

  “the upper boundary of the triangle is closer to a $105 per barrel. So a really good amount of upside to that resistance.”at 36:38

US Treasuries & yields

• Katie Stockton · Fairlead Strategies

  10-year yield breakout above 4.75% resumed the uptrend; yields likely stair-step higher over the next year.

  Weekly closes above the 4.75% prior high broke the 10-year yield out of a long-term range, with immediate follow-through up to 5%. This signals the secular uptrend has resumed and a multi-month momentum shift. Yields are now a potential headwind for certain market segments. Consolidation around current levels is natural, then yields should stair-step higher, with 5.25% as the next resistance level.

  “respect that big breakout that we saw as something that supports higher yields even over the next year, potentially... we do think that there will be marked like a stair stepping higher for yields after this big run up that we've had.”at 17:33

Credit markets

• Katie Stockton · Fairlead Strategies

  Credit spreads flash no equity sell signal yet, but that could change before year end.

  Spreads are slow-moving but reliable: they widen in bear-market reversals, and a breakout signals more than a shallow pullback. She currently has no equity sell signal from the spreads she watches. Some ex-US segments look tenuous, but her focus is the US. The spreads are close to resistance levels, so this could change even before year end.

  “We don't have a sell signal, if you will, for equities from the spreads that we're watching right now... right now, it's okay. I think even before year end, we could see that change.”at 21:57

AI chips & semiconductors

• Katie Stockton · Fairlead Strategies

  Semis are emerging from correction; short-term momentum is healthy, so she is open to adding exposure.

  Semis have not been the best long-term charts and are a main source of the monthly overbought downturns. Recently they have started advancing from corrective phases. Corrections within the bull cycle, still supported by the weekly cloud, are times to add exposure for those without an ultra-long horizon. Short-term breakouts above the 50-day averages make momentum healthy, though longer-term deterioration may mean no new highs. SMH still has meaningful upside to its highs.

  “we're intrigued by the action in the semis. You saw some short term breakouts above the likes of the fifty day moving averages. And so momentum's pretty healthy there short term.”at 30:29

Gold & precious metals

• Katie Stockton · Fairlead Strategies

  Gold is in a cyclical downtrend below the weekly cloud, but still a useful hedge if equities weaken.

  Gold is in a cyclical downtrend, below the weekly cloud and showing downside momentum, so from a trend-following view it looks bad. Support around $3,900 left in the wake of the prior uptrend could limit downside follow-through. Historically gold has been low beta versus equities, and she expects it to serve as a hedge when the equity tape weakens.

  “Right now, it is a downtrend... It's really more of a downtrend, a cyclical down move with gold now below the weekly cloud and exhibiting downside momentum. That doesn't mean it's a bad hedge, though.”at 33:55