CAPIS recently held its October 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 Continues to Have Weak Long-Term Momentum

• SPX Indicators, while at support, have weak Long-Term momentum.
• There remain signs of Short-Term downside risk – bearish moves.
• The equity markets remain “ominous” with very negative Long-Term sentiment prevalent.
• Despite this backdrop, the potential for a relief rally exists. Stockton reiterates that a cyclical bear market has a hold with a secular bull market.
• SPX interim support can be found at 3505 while 3200 is targeted support.

Beware of Mega and Large Caps

• Large Cap growth has been a source of downside market leadership.
• The current market bear market sentiment is also spreading to the Mega Caps, such as AAPL, AMZN, or other FAANG stocks. Expect downside leadership from tech stocks.
• AAPL, which has tremendous institutional and retail implications, has lost Long-Term momentum.
• Market internals have logged oversold extremes and breadth has been very bearish.

Higher Volatility – No Kidding

• The high volatility cycle has a hold of the VIX.
• VIX shows an overbought indication – similar to the 2007/8 time period.
• Investors should be watching for a spike in the VIX from current levels.

U.S. Equities Are Global Safe Haven

• International markets mired in a “Long-Term” downtrend versus the U.S. – both in Developed Global and EMEA.
• Dollar is now in a steep uptrend with little nearby resistance until 121. There are some indicators of Short-Term exhaustion so market participants can expect some Near-Term sideways movement.
• Bitcoin has stabilized near its Long-Term support after its recent drop. Expect an oversold bounce before it resumes the downtrend. Stabilization, Stockton says, is only “temporary.”
• Gold now shows signs of downside exhaustion after its recent breakdown. Note that gold has outperformed the S&P 500 indexes.
• WTI crude oil has lost its Long-Term upside momentum and is in an intermediate downtrend. Support is seen at $76/$77 per barrel but could give way to a relief rally – thus establishing a fresh trading range.
• 10-year Treasury yields are testing the 4.00% resistance level and could see their next resistance at 5.25%. The uptrend here has a hold on the market despite “a few signs” of exhaustion.

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