Last week we held our August research call, 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.
Our own David Choate, COO and Executive Director of Trading and Sales, updated attendees about CAPIS’ daily Morning Holdings email which provides information on certain symbols. The email software sweeps information services at 6:30 am and can be accessed through CAPIS’ sales team. CAPIS continues to provide other high-quality digital content such as The Morning Note and commentary on its website. (2:00)
Katie Stockton’s presentation addressed the following topics:
SPX and NDX Hovering at All Time Highs:
According to Stockton, the S&P 500 index (SPX is in a long-term uptrend. There is room for improvement in the daily stochastic indicators she watches, but the market could hit 4600 by year-end. (5:20)
As for the Nasdaq 100 (NDX), there’s been a loss of strength in the FAANG complex and there have been rotational pullbacks in the high-growth and cyclical sectors. This, she said, makes it difficult for portfolios to outperform if not exposed to the sector in favor at the moment. (8:35)
She concluded that Fairlead Strategies anticipates more volatility in the fall. (9:43)
Active Sector Rotation is Key
Stockton said rotation remains a key factor in navigating the markets and that “thankfully” cyclical sectors are perking up. She advocated going overweight in the Communications and Healthcare sectors as both are enjoying a turnaround thanks to what she termed “the vaccine and pharma trade.” Underpinning the trade is the expectation COVID-19 concerns are heightened and remain a primary market driver. (16:00)
As for other sectors, Stockton said Consumer Staples should be underweighted once market moves out of its current corrective phase. Financials remain in a corrective phase and should be eyed — Fairleads is waiting for them to retest support levels. An equal weight bias should be given to Utilities, Technology, Real Estate, Materials, and Industrials. Retailers, due to COVID-19, may struggle through the rest of earnings season.
The Economy, Stupid
Stockton said US equities remain the most attractive globally as EM continues to underperform. US Treasury yields are losing downside momentum and investors can expect to see more sustained uptrends but no new highs in yields this year. (22:40)
Commodities are correcting but are not without support.
The dollar index has established a double bottom formation.
Gold has been directionless and shows early signs of negative long-term momentum.
Bitcoin is newest asset-class covered Fairlead, as Stockton says the firm sees Bitcoin trading similar to a fiat currency. While the eponymous crypto is overbought, it will remain so due to investor demand and Stockton said she thinks Bitcoin will continue its long-term uptrend as a result. (26:49)