The Signal Before the Spike | Katie Stockton on What the Charts Tell Us About What Comes Next

Episode Summary

Executive Summary: The discussion centered on a technical read of markets showing weakening S&P 500 momentum, a likely prolonged choppy phase, and a major rotation away from mega-cap growth toward value, energy, and defensives. Crude oil and gold were framed as cyclical shifts rather than simple spikes, while the guest emphasized using long-term indicators, breadth, and systematic rules to manage risk and identify better entry points.

Main Topics: S&P 500 momentum deterioration (Priority: 5/5): The guest said the monthly S&P 500 MACD has turned into a sell signal, reinforcing a loss of long-term momentum and suggesting a more prolonged choppy or corrective market rather than a quick washout. Support levels and market structure (Priority: 5/5): Key S&P support around 6,130-6,175 was identified as an important downside gauge. A break would likely open the door to 5,900 and potentially the 5,000s, while a bounce would only matter if momentum improves afterward. Crude oil breakout and geopolitical context (Priority: 5/5): WTI crude’s monthly MACD buy signal in February preceded the Middle East conflict, implying the move was already technically underway. The guest argued the oil spike likely marks the start of a new cyclical regime with higher highs and higher lows. Mega-cap leadership loss and market breadth (Priority: 4/5): The Mag 7 and broader large-cap tech have lost leadership, weighing on major indices because of their concentration. Breadth has weakened, but not in the same washout fashion as the prior year’s correction. Value vs. growth rotation (Priority: 4/5): A significant shift from growth to value was highlighted across large and small caps. The guest framed this as a cycle that may last around a year and create opportunities in sectors previously ignored by investors. Gold strength and possible consolidation (Priority: 3/5): Gold’s strong, near-parabolic run was described as likely due for a pause or sideways-to-lower consolidation, with monthly countertrend signals suggesting an off year before the secular bull trend resumes. Systematic sector rotation via TAC ETF (Priority: 4/5): The ETF strategy was explained as a long-term, rules-based, equal-weight sector rotation approach that can move into treasuries or gold when sectors fail to qualify, aiming to reduce drawdowns without capping upside.

Key Arguments: Monthly MACD sell signals on the S&P 500 are rare and usually indicate a meaningful cyclical shift rather than a brief correction. The current S&P decline is more concerning because it has been a slow grind lower, which is more damaging than a sharp washout. Support levels are useful as gauges, but entries should depend on indicator improvement after a bounce, not the level alone. Headline-driven volatility makes technical analysis harder, but indicators are designed to filter noise and distinguish meaningful breaks from temporary reactions. WTI crude’s technical reversal began before the geopolitical shock, suggesting the rally is not purely event-driven. The speed of a move matters: explosive rallies or declines can be countertrend, but a breakout plus confirming indicators can mark a real regime change. Correlations between assets are informative but should not be used mechanically as trading signals. The Mag 7 and large-cap tech remain crucial because of their index weight and portfolio concentration, so their weakness can drag the whole market. Value outperforming growth usually signals a weaker tape, even if it creates opportunities in basing or turnaround names. Breadth is most useful at extremes and as confirmation of price action, not as the primary signal. Moving averages like the 50-day and 200-day are widely watched and can become self-fulfilling support/resistance levels, but they are not standalone timing tools. The TAC ETF seeks strong long-term sector trends and shifts into defensive assets when few sectors qualify, aiming for lower beta and smaller drawdowns. Gold’s strong rally may need consolidation before the next leg higher, so shorter-term caution is warranted despite the secular bull trend.

Data Points: S&P 500 monthly MACD: New sell signal as of end of March - Guest said this confirms weakening long-term momentum in the S&P 500. WTI crude monthly MACD: Buy signal in February - Technical reversal occurred before the Middle East conflict began. WTI crude price: Around $109 per barrel - Referenced as the level after the breakout and follow-through in crude oil. Crude oil breakout threshold: Around $68 per barrel - Level above which the longer-term cyclical downtrend in crude was considered reversed. S&P 500 support zone: 6,130 to 6,175 - Key downside support area derived from multiple chart inputs including Fibonacci retracement. Next S&P 500 downside level: 5,900 - Potential next support if the 6,130-6,175 zone breaks. NYSE stocks above 200-day moving average: About 44%-45% - Breadth measure cited as weaker than a prior washout low. NYSE stocks above 200-day moving average at prior low: Below 20% - April 2025 low used as comparison for breadth exhaustion. Large-cap technology share of S&P 500: About 32% - Used to explain why Mag 7/tech leadership matters so much for the index. Bitcoin/Nasdaq 100 correlation: Roughly 30% to 70% at times - Example of correlations varying significantly over time. Ichimoku cloud forward shift: About 26 periods - Guest described the cloud model as projecting trend forward. Stochastic oscillator oversold level: Below 20% - Defined as oversold in the guest’s technical framework. Stochastic oscillator overbought level: Above 80% - Defined as overbought in the guest’s technical framework. Short-term oversold horizon: Days to about 3 weeks - Approximate time horizon for daily-chart oversold signals. Weekly-chart oversold horizon: Weeks to about 3 months - Approximate time horizon for weekly-chart oversold signals. TAC ETF sector allocation: Best 8 sectors when available - Core strategy is equal-weighted sector rotation across the strongest sectors. TAC ETF fallback assets: Short-term Treasuries, long-term Treasuries, and gold - Used when fewer than eight sectors qualify under the methodology. TAC ETF exposure as of a couple days prior: 100% sector exposed - Guest said the fund had full sector positioning at that time. TAC ETF 2022 positioning: Only energy held for much of the year - Illustrates how dynamic the strategy can become in stressed markets.

Pivotal Quotes: "The message is a little bit more bearish or maybe neutral at best, I think, for what we're seeing in the monthly SPX chart." — Katie: Her assessment of the S&P 500’s long-term technical setup. "It's more the slow grind lower that actually is something that ends up being more problematic, I would say, for the market." — Katie: Explaining why the current decline is more concerning than a sharp washout. "I think it's the beginning of a different cycle." — Katie: Her view on crude oil after the breakout and MACD shift.

Implications: Listeners should expect a more selective, rotation-driven market with weaker index leadership, stronger emphasis on risk management, and better opportunities in value, energy, and defensive setups. Technical confirmation and breadth extremes matter more than headlines alone.