This article was penned by CAPIS

Last week we held our February research briefing, featuring Fairlead Strategies co-Founder Katie Stockton. Fairlead Strategies, LLC is a Connecticut-based independent advisory service providing unbiased technical analysis, helping investors manage risk and discover opportunities.

Katie Stockton’s presentation addressed the following topics:

Market has Lost Upside Momentum

• Technical factors point to tougher year ahead; will be difficult to find value in stocks.
• After January turmoil, SPX points to long-term market exhaustion.
• FAANG mega-caps have entered a trading range and are showing downside leadership.
• MACD says market is not oversold just yet and potential for more corrective price action exists.

Market Dynamic Resembles 2018 Experience

• Like in 2018, the market has re-entered a period of higher volatility with the VIX approaching the 50 level – right now holding around 40.
• Indicators point to weakened breath and created a challenging environment for stock trading. Hedging is advised with inverse ETFs and other esoteric instruments.
• Growth stocks are exhibiting downside leadership and point to an underweight recommendation. Value stocks will exhibit better performance moving ahead.
• Sectors to watch are Consumer Staples, Energy and Financials; all have broken to the upside.
• S. equities, while difficult to trade in 2022, are still better relative to Chinese stocks and other emerging markets.

Commodities

• Dollar is stalled in the 2021 uptrend and has lost some intermediate-term momentum.
• WTI crude oil is poised for a retracement – sell now to lock in gains as short-term indicators point to exhaustion after a strong run.
• Gold has hit and pushed “triangle resistance” and resumed its long-term uptrend.
• 10-year Treasury yields have broken through the psychologically important 2.00% level and face resistance at 2.13%. Higher yields are almost a certainty.
• Bitcoin’s upside long-term momentum remains weak and is trying to hold onto important cloud-base support.

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