trade, the S&P 500 continues to advance, and this does come after its latest breakout.
The charts are also pointing to a potential run towards that 8000 level, but with long term indicators warning of a pullback later this year, traders are trying to figure out how much runway is left in this rally.
Meanwhile.
Software stocks are making a big rotation against chip makers and crude and gold are also staging bounces and the yields are holding steady while here to map out what the charts are telling us is Katie Stockton founder and managing partner at Fair Lead strategies.
Katie, good morning.
Thank you so much for joining us.
So as you and I were talking.
We went on air.
There are so many data points, so many headlines to sift through, but when it comes to the S&P 500 and some of the patterns that you're seeing, can you tell us how much runway this breakout actually has and what the signals for later on in 2026?
The breakout that we saw from the 2 month trading range or corrective phase did have implications for a few weeks, so we're already a couple of weeks into that.
And yet we now have a new price pattern forming on the chart.
It's a very short term pattern as well, called a flag pattern.
Essentially it's a sharp run up followed by a consolidation phase.
That consolidation phase is where we stand currently.
If we were to see new highs, that consolidation would resolve to the upside, meaning the flag pattern would be confirmed as another positive short-term catalyst.
And that could help enhance the upside potential that we already feel that we have from that original breakout from a couple of weeks ago.
So the short term price action is very much encouraging for the next few weeks.
8000 is an objective you could derive from the width of the trading range, but if this flag pattern is completed, then 8200 would be a measured move.
So more aggressive, of course, but Uh, that would be sort of a hopeful level from the flag breakout.
And those are the things that we're watching in the near term.
And then longer term, we are bullish, you know, the secular bull trend is very much intact.
And yet, there are some signs of long-term exhaustion that tell us that we're probably in store for more volatility.
Certainly in Q4, a correction would be likely.
We've already seen, of course, a significant correction, and this is based on measurable overbought over sold indicators.
So we have our eyes on that always, and because of those indicators, we are going to be scrutinizing the short-term action.
Yeah, and Katie, both short term as well as long term, a lot of key levels to keep our eyes on for the S&P 500.
But for our viewers out there, tell us what's happening when it comes to fear and greed.
Yeah, it's been really interesting.
We did have a more fearful reading.
Uh, from the fear and greed index that we track.
So that is the stuff of short to intermediate term lows typically, and indeed we did see a reaction to that.
Now we're mostly in neutral territory when it comes to the sentiment metrics, at least the ones that we track.
We're watching the VIX in particular, or the CBOE volatility index, which has an inverse relationship to the S&P 500, and we see as a transactional gauge of market sentiment.
It is.
Right on some support from previous lows, and if it were to break that support, that would actually be a positive for the S&P 500, telling us that we could remain in this lower volatility environment that's characterized it for a few weeks now at least.
So we're watching the VIX.
We have a neutral reading from fear and greed, room to that overbought or sort of extremely greedy territory, and I think that's part and parcel with the corrective action that we saw, especially in the market's leadership.
And Katie, I do want to zoom in on sectors in particular when it comes to the AI trade as well as tech.
So software as well as semis have been in the spotlight and IGV breaking out of a cyclical down trend and also outperforming chip makers for the first time in months.
But give us your take on what we're witnessing right now.
And do you think this could be a real passing of the torch from semis back to software?
I think so, based solely on the chart, if you look at a ratio of the IGB ETF to the SMH or semiconductor ETF, you'll see that there is a cyclical reversal that's been solidified already by that ratio.
So it tells us that the bullish action in the software sector could be something that's here to stay, and maybe it's counterintuitive for the AI trade, or maybe it's just that the Stocks reached valuations that became quite attractive at the same time, we saw the loss of sentiment behind the semiconductor sector, but nevertheless, it does look like a significant reversal from a technical perspective.
It doesn't mean that semiconductor stocks can't move higher.
It just means that perhaps they wouldn't be the same source of upside leadership that they were before the correction.
And Katie, for a quick look at commodities, I know that all of us are paying attention to the moving averages when it comes to crude oil, especially given some of that uncertainty regarding the conflict in the Middle East, and we're also watching gold prices as well in addition to the US currency.
So give us your take on what you're seeing in the charts when it comes to oil and gold.
For crude oil, looking at WTI, we feel it's going to be more of the same, more short-term volatility in both directions, but overall series of higher lows there because it is supported by our long term trend falling gauges to expect that crude oil prices will probably remain firm, if not continue higher in a volatile fashion for the price of gold.
We have seen a bearish reversal from a long term perspective, but now, of course, short term, we see some strength, and that strength has room to continue based on our short term indicators.
So we're looking for a bigger relief rally in the price of gold, but we think that, you know, people might want to be in the mindset of selling into additional strength for the price of gold because of the breakdown that preceded this relief rally.
And while I have you here, Katie, I do want to get your perspective on the crypto market in particular Bitcoin.
So we've been seeing plenty of volatility when it comes to digital assets, but I understand that you recently launched BNAB to adjust Bitcoin exposure based on technical signals here.
So what are your charts signaling for Bitcoin right now and what trigger tells you to actually lever up versus de-risk when it comes to the crypto major?
Well, I think it was probably a good time to launch an ETF focused on Bitcoin because we have seen the crypto winter.
Bitcoin remains in a cyclical down trend, but it does have signs of downside exhaustion from a longer term perspective.
After holding support, which was quite strong, between about 58,000 and 60,000.
It hasn't done much. of late, but our ETF is designed to use leverage when the momentum is strongest across multiple time frames.
So we want to take advantage of those types of moves from Bitcoin, so sort of harness that volatility while avoiding or reducing exposure during the more sort of boring phases like the one that we've seen.
You know, consolidation phase, down trending markets, holding reduced exposure in those environments can be really additive over the long term.
And finally, Katie, before I let you go, I do want to get your perspective on Treasury yields, of course, as well as another look at sectors.
So in New York morning trade on the heels of those CPI figures yesterday, as well as PPI figures this morning, we are looking at.
The 10 year yields hovering right around the 4.645 level, but do you think a pause in yields will be enough to actually give a real lift to beaten down sectors such as REITs or even say utilities?
Well, right, those interest rate sensitive sectors have really underperformed and it also is associated with risk on positioning, you know, a move back into technology, so they've had that double whammy.
But to us, we think that their underperformance should at least moderate here as Treasury yields remain stalled, and we do think that the tenure yield. will remain in this consolidation phase, at least for now, just based on some signs of upset exhaustion, close to resistance, which is pretty well defined now for the 10-year, right around 4 3/4.
Of course, if we saw a breakout above that level, that would support higher yields, but it doesn't look like that kind of breakout is imminent at this time, albeit ultimately supported by the long term indicators that we track.
So temporary relief for now for those interest rate sensitives perhaps as yields continue to consolidate.
Well, Katie, we will have to leave it there for today, but I appreciate your time.
Thank you so much for joining us today and thank you so much for your perspective on all of the charts.
Of course.
