Don’t Wish for Fed Cuts: Crash Trigger This Fall I Katie Stockton
Summary
Market Overview: The podcast discusses the current market conditions, highlighting record highs in the Dow Jones, declining momentum in the S&P 500, and significant drops in commodities like oil, gold, and silver.
Technical Analysis: Katie Stockton emphasizes the importance of technical analysis in investment strategies, focusing on price action, trends, momentum, and market sentiment to guide decisions, rather than relying solely on fundamentals.
Indicators and Tools: Key indicators used by Stockton include trend-following tools, momentum indicators, overbought/oversold metrics, and market internal measures such as sentiment, breadth, and volume.
Market Sentiment: The discussion touches on the Fear and Greed Index as a measure of market sentiment, suggesting that extreme bullishness isn't necessarily bearish until challenged by momentum shifts.
Market Outlook: Stockton maintains a bullish long-term view on major US indices but notes short-term momentum loss since June, advising to watch the 20-day moving average for signs of trend changes.
Fed Rate Cuts: The podcast warns against hoping for Fed rate cuts, as they often precede market corrections or recessions, despite being welcomed from a macroeconomic perspective.
Commodities Insight: Gold and silver are discussed as maintaining long-term uptrends despite recent sideways movements, while platinum is noted for a long-term breakout but currently in a retracement phase.
Oil and Dollar Trends: The podcast suggests a potential long-term low for crude oil, with current support around $60, and describes the US dollar as in a cyclical downtrend with recent support discovery.
Transcript
It is a very strange day in the markets. The Dow Jones just hit another record high. The S&P 500 is losing momentum. MAGA caps are dropping and the commodities are getting slaughtered. Oil is down. Gold is down. Silver is dropping about 2% as we speak today. What is happening? We have invited a phenomenal guest to help shed some light shed some light onto market fundamentals and also just some technicals. What is happening? What should we be concerned? What does uh what what will the future tell us? It's Katie Stockton. She's the founder and managing partner over at Fairlead Strategies and I'm really looking forward to speaking with her. We've had a lot of or we've had a number of technical analysts here on the channel. Christopher Mulan um just to name one for example and I'm really like their analysis because it's supposed to take the emotion out of investing. So we'll we'll see if we can achieve that again in our conversation today and uh we're really curious what her outlook is for the rest of the year. Of course, before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and it's a free way to support our channel. So, thanks so much for doing that. Now, Katie, it is great to have you on the program. Thanks so much for joining us. >> Of course, glad to be with you. >> Yeah, really looking forward to this, Katie. But we got to take the first couple minutes just to introduce you properly to the channel because I really want to see where you're coming from, meaning like where's your like your line of thinking? Tell us a bit more about yourself and tell us about Fairle real quick. >> Of course. So, Fairlead Strategies is probably best described as an independent research firm, but we also manage an ETF called the Fairle Tactical Sector ETF or TAC TACK and it originated in 2018 Fair Lead. Before Fair Lead, I was on Wall Street as a publishing technical strategist. So, I've always pretty much been focused on technical analysis in my career. I'm a CMT, which is basically a chartered market technician, similar to a CFA, uh, but we focus on charts. We focus on price action. And it's the focus on price action and the supply and demand for securities that does help us keep those emotions out of things. We are watching trends. We're watching momentum. We're watching market sentiment and we're letting those guide our decisions as opposed to the company's fundamentals in the equity markets or supply and demand for the actual products, that type of thing. So, it's really the securities that are publicly traded that we care the most about. And in our research, we're writing on just about anything that trades. So we we have probably built our reputation around US equities, but we do cover on a regular basis ETFs, we cover gold, we cover crude oil, we often look at silver, platinum, things of that nature. So we're covering just about anything that is out there and impacts equities. >> Perfect. Yeah, really looking forward to discussing all of the above with you there, Katie. um in in in today's markets like technical technical analysis is as you said supposed to take out the emotional component how does it compare to fundamental analysis these days especially given the uncertainty that we're looking at >> I would say they don't necessarily compare but they complement one another and um I think about technical analysis as serving a real need in the investment community in that fundamentals will often be released to their data on a quarterly basis. So technicals can help help fill in those blanks from a shorter term perspective and they can also help understand we call this navigating the gap when a stock or a commodity or fixed income is acting out of line with expectations from either a fundamental or macro perspective because like it or not the the investors behavior is what's driving these these price trends And the behavior is influenced by any number of factors. And sometimes unfortunately people aren't making decisions that are well aligned with what expectations are based on that company's fundamentals etc. Even yields don't seem to act the way they should based on the speculation around the Fed meeting and what have you. So we try to navigate that gap by using the charts to understand what the supply and demand dynamics are and also to understand what key levels are in play, support or resistance levels and then trend and momentum are very important to our work as well. >> Yeah, you you just mentioned a couple indicators um already. I was going to just ask you as a followup to to get the holistic picture here like what are some of the go-to indicators that you're looking at um that that work in this current environment? You know that it's funny because the methodology that we've had we've had for many years and it's because it is mathematically based on price. There's no need to really change and adapt to a different market with different indicators. Uh but certainly the indicators will take on different characters in different environments. For example, in a trading range environment, we might give more weight to an overbought oversold metric. Whereas in a trending environment, we might give more weight to things like moving averages. The way I like to categorize the indicators that we use would be trend falling or momentum, overbought, oversold indicators, and relative strength tools. But then we also would enhance all of that with the analysis of support and resistance looking often for breakdowns and breakouts as catalysts. And then the market internal measures. So that would be things like sentiment and breath and leadership and volume. Those will help us understand what the influences are in terms of investor behavior behavior collectively driving these moves. >> Yeah. Really interesting. Like you you mentioned overbought and that's always a term I see. I I stumble over. This is like oh this is overbought yet the stock keeps going up and I I look at the S&P 500. I personally think it's way overbought but that's my personal opinion. Probably a bit of emotion in there as well and yet it keeps going up. Can can you define just overbought for me perhaps? like what does it mean and uh how do we identify it? >> It's a bit of a misnomer honestly. It's a reading on what we're using as a stochastic oscillator and some people might use something called an RSI for that same reading and there are multiple measures that we can use to get to an overbought oversold takeaway. The stochastic oscillator that we use in particular logs an overbought reading above 80% and an oversold one below 20%. The calculation stems from price action. So it's looking at where prices are relative to a high low spread. If we're seeing, you know, the S&P 500 for one continually closing near the high end of that range, it becomes so-called more and more overbought to the point where it can get all the way to 100%. Now, that is not necessarily bearish, and that's what I think you're you're noting. It is really a reflection of momentum. So an overbought reading should be associated with positive momentum especially breakouts. Breakouts almost always have an overbought indication alongside them. So the overbought condition is not a sell signal in our work. It's when we see the overbought condition give way to something less than that when the stochastics fall back below 80% that we feel we have an overbought sell signal. And that's the action item and that's what we don't have for the equity market right now. >> Yeah, that's yeah, we we'll we'll get to that in a second because I really want to get your market take as well. But I'm just working on demystifying technical analysis for our audience here a little bit. If if there was one thing you would say to our audience like don't be afraid of technical analysis like what would it be like can we demystify together? >> Well, I mean keeping it simple is really key in in the discipline. It's something I learned very early on. If you find yourself using too many indicators, things that will be duplicative in their takeaways, as an example, maybe you're using both the RSI and the stochastic oscillator as an example. Um, you know, that's where it gets to be um dangerous in a way where you can let the confirmation biases, I guess, infiltrate your work. So, keeping it simple is really key. And so when somebody's just getting into technical analysis, I tell them it almost doesn't really matter what they have in terms of their toolbox at at the beginning just to look at bar charts or price charts every day to have a little bit of their screen dedicated to it. you're starting the process that way and maybe throw in a moving average and see how that acts alongside price and acts to I'd say eliminate the noise that is evident in the bar charts. So to keep it simple, start with something that is very digestible and that gives that nice visual element of what's happening in terms of the price trend. So start starting there and then you can always add other indicators that you feel add value but cautioning against using things that are duplicative. >> What do you make of the fear and greed index that CNN publishes? I'm curious. I've been quoting it a couple of times in the past here on our channel. I'm not quite sure what to make of it. So I'm curious like how would you interpret it? >> I think it's great. I you know there's a lot of ways to measure market sentiment and the fear and greed index has taken seven components and rolled them up into one indicator and these are all track uh I'd say transactional sentiment metrics meaning it's saying what are people doing not what are they saying because there are also those investor polls out there that would help us understand maybe what the feelings are but the transactional gauges I think are the most informational and that's what that fear and greed index encompasses and it's just another oscillator right when we see a 75% plus reading that's an overbought reading in market sentiment and vice versa. So for for the same way that we're looking at the stochastics maybe a downturn is a bit more concerning than that first 75% plus reading because bullishness even extreme bullishness isn't necessarily bearish. It's when you see that bullishness challenged by something and also then it filtrates into momentum. >> No, fantastic. No, it was a personal question almost because I keep looking at from time to time and I'm trying to make sense of it and where to put it like how how important or how valid is it as a technical indicator. I'd say >> I think it's it's all about measuring extremes and that's how we look at a lot of the market internal measures things like breath the cumulative advanced decline line. we generally want to see confirmation. But in metrics that are oscillating, for one, we could talk about the percentage of stocks above their 50-day moving averages. When those reach extremes, there is information in that. And then when also we see multiple extremes logged by multiple measures of market sentiment, breath, etc. That's when we can have a very powerful takeaway that things might be overdone, overstretched on the upside or downside. >> Perfect. I think we've established that you definitely know a lot about techn technical analysis and way more than I do. That's why I'm really curious about your calls now um on on the general market. Let's maybe start there. I mentioned Dow Jones S&P 500 pretty much trading near record highs. I think the Dow Jones just this morning marked a new record high as well. What what is your market uh market call for the rest of the year here, Katie? >> Well, we don't typically assign a year-end price target. It it the technicals aren't predictive in that sense and really nobody knows, right, where the S&P 500 will end the year, but we try to keep the trends on our side and we try to do that over multiple time frames. So we always have a long-term view and then we let the sort of shortterm inputs tone uh our biases within that framework. The the long-term view is bullish for the major indices in the US. That includes the Dow industrials, the S&P 500. It even includes the Russell 2000, which while it has been in a secular trading range, it does have a positive long-term momentum shift that we've seen. the momentum gauges on the monthly charts point higher and yet we've seen a downtick in momentum certainly short to intermediate term it's not enough to generate any kind of meaningful breakdowns in any of the major indices in fact we do have mostly them close to to new highs even all-time highs so we want to defer to that sort of price momentum that has been very persistent in this environment even as the indicators suggest otherwise. So, what we've done and and this goes along the lines of keeping things simple is to say we just really want to keep the 20-day moving average on our side. The 20-day moving average is a good way to visualize the short to intermediate term trend within a longer term context. And when it rolls over, that's when we'll start to feel like there's enough of a loss of momentum to warrant some repositioning. The loss of momentum that we've seen up to this point, it began in in early June. It's been managed very, very well. Part of that has come from the contribution from the mega cap stocks. So, we're watching the 20-day moving averages. They still mostly point higher. We've seen them waver for small and midcap proxies. So that's something that suggests that breath is deteriorating to some degree, but not enough to warrant repositioning at this time or to suggest that people need to be extremely hedged. Maybe some partial hedges or partial reductions in exposure as we see the loss of momentum manifest itself in those uh 20 days rolling over. >> How does a loss of momentum correlate with seasonality? You just mentioned mid June and I immediately went like well that's the start of summer at least in Europe. Um what what does it mean? Is there a correlation to seasonality as well and what do you expect come uh post Labor Day? What is it? September 2nd I think is the day after Labor Day. Can we expect another rally with proper momentum and volumes? >> I you know I think it's funny. Seasonals do certainly impact our I'd say biases but we're not going to make a decision based on seasonals. rather we will adhere to the momentum gauges over those indications but we always have the seasonal influences in mind and there is always that sell in May and go away which suggests that you come back in October and the reason for that is that September October even now at times August will carry down downside volatility meaning we see some kind of corrective price action typically over those three months that's meaningful but then it often gives way to very nice entry point ahead of a Q4 recovery. So, a loss of momentum would be in following with heightened volatility. Whether it's August at this point or September, we obviously don't know, but we will be mindful of that loss of momentum once it becomes evident in the 20 days because of the seasonal influences in part. So, we do let it influence our our sort of biases in that way. It will make us more respectful of a loss of momentum than perhaps otherwise. And uh we we will defer to the longer term uptrend though. So if we see a what appears to be a short-lived pullback, I think we'll probably see investors step right back in on that because we really haven't seen much of a pullback since that April low was established. Yeah, I believe it you you actually called the April low and told people to to buy back into it if I'm not mistaken. I hope I'm not, you know, misinterpreting anything I've picked up while researching for this interview here. But um how did you sort of react to that massive macro shock being the tariff announcement? How does it being reflected in the technical analysis in general? >> Well, those kinds of u I'd say headline events can influence the market internals such that they become extreme. So, uh, when I referenced the multiple extremes and things like breath and sentiment, that's what we had right around the April low. So, those were oversold extremes that we saw from multiple inputs. And that's when we pay attention. And then when also you see the uptick in momentum, perhaps it's coming down on less momentum, that can also enhance the uh possibility for a turning point. So we had good weight of the evidence in April that at least a shortterm low was being established. I would say once we passed May though the indicators started to diverge from the price action in a pretty frustrating way. Um, so ultimately we thought that we would see the market roll over and it just kept going higher and it reminded us to I'd say respect the action from the mega caps which have been major contributors this year as in 2023 and 2024 to the returns for the S&P 500 for also the NASDAQ 100 year to date. So we want to respect the action in the MAGA caps which has been mostly bullish. We have some minor signs of upside exhaustion there, but just to suggest that we'll see consolidation, maybe a seasonal pullback and then something that should give way to a better entry. So, we're very uh I'd say respectful of those those heavy weights. >> You you said something interesting in your interview at C on CNBC yesterday. It's like and you you dropped it in a side note is that the market shouldn't hope for a Fed cut or it shouldn't like might have the wrong expectation. like maybe you can elaborate on that cuz I thought it was an interesting statement and unfortunately the host sort of brushed over it and moved on in the conversation but I thought it was an interesting tidbit like why do you think the market will be disappointed in a Fed cut? Well, it's funny because the market seems to be welcoming a Fed cut, but it's really welcomed more from a macro standpoint than it should be from an investing standpoint because they these sort of Fed write rate cycles as they unfold. When you see a a peak in the Fed funds rate, it tends to be u something that happens ahead of a recession or at least ahead of some kind of corrective action in the equity market. So it's very common to see a weaker equity market on the back of the initiation of the Fed rate cuts. So in a way we we should be careful what we wish for. There there's other influences that it's out of our wheelhouse, but it maybe it's partly related to the actual level, not just the trend. Uh, but I would say that we shouldn't necessarily welcome it, especially after such a huge runup for the S&P 500. For other reasons, perhaps we should for the job market for one, for consumer sentiment as another, but for the S&P 500, I think if we see one, it it might be something that would be sold u by investors. >> Yeah. Like same question almost for the treasuries as well. like what do you expect them to do if that the Fed decides to cut? We're all expecting a 25 basis point cut here in September. What do you expect they will or how they will behave? >> Yeah, I mean you would expect them to stay positively correlated to the Fed funds rate. So you would expect them to probably start to move lower within their range that it has indeed been a very persistent range for at least 10ear Treasury yields. they've been mostly sideways for uh years now even and so this backing and filling that we've seen has been reflective of indecisiveness in a way on that front. So we would expect that range or at least the smaller intermediate term range that we're watching to resolve lower but we're not going to necessarily position for that but rather react to it. And that's something that's uh I'd say part of our methodology is that we're more reactive than we are anticipatory. Um so we we can you know assign probabilities to things but not until we see the breakdown or see a breakout would we react to that because then you're running the risk of being too early um and just on the raw wrong side of things. So, if we were to see a breakdown in yields, of course, that would be something uh that we would react to. >> Just as a hypothetical, and again, this is not financial advice or anything, but if I were to tell you on September 1st, for example, I'd go I'd go short the S&P into the Fed meeting, I'll go long bonds into the Fed meeting, what would you tell me? >> Well, at on September 1st, you said, >> "Yeah, I'm just trying to mark it somewhere because when what's the Fed meeting?" I think September 20th. September 17th, I believe. >> Yeah. So, I would say um I mean, listen, it's a bet on what they're going to do, and I I can't say I have any visibility into what they're going to do, but if if indeed they do cut rates, um I think it's more likely a trade that will work out for you, um at least to capture the downside volatility that does tend to unfold September or October. Um and then perhaps just another rebound for treasuries which have also of course been uh rangebound. We've seen TLT as one proxy for treasuries just backing and filling around their 200 day moving average above the 200 day moving average. It gets more interesting at least in price terms. U but of course we're we have to consider them in terms of total return. If you look at a ratio for treasuries versus equities, I'd say it's still too early to feel confident that we're going to get any kind of outperformance from fixed income over equities at this time. But there are oversold indications. And if we were to see that yield yield, I shouldn't use that word manifest itself in momentum behind the ratio, then that would warrant uh building your relative exposure to fixed income. We just don't quite have that confidence yet that that's there. But if it unfolds, whether it's ahead of or on the back of the Fed meeting, it would be an interesting shift because it's been pretty persistent in terms of underperformance by fixed income. >> No, I appreciate you humoring my question here. I was just, you know, trying to put some context around, make it relatable like how our audience could potentially look at the situation as well. Um, before we get to the commodity, there's one more asset we need to discuss real quick, Katie, and that's the US dollar. Um what do you what do you make of it? Uh I think it's at around the Dixie is 98 at 98 right now as we speak. Um is it strong? Is it weak? What's the trend? >> You know, it's a cyclical downtrend and we did see long-term breakdowns for the dollar index that we were very respectful of. There is support though. If you draw way way back, there is an uptrend channel like a secular uptrend channel that shows some support not too far from the recent lows in the dollar index. So, it's possible that we see support discovery here that's more meaningful than what we've already seen. The intermediate term momentum has actually shifted to the upside to support a relief rally for the dollar, but we are viewing this action within the context of the cyclical downtrend at this time. So, we're respecting the primary trend, but also acknowledging that the support discovery has been, you know, sort of there's an inkling of it. And then also we have seen certainly a loss of downside momentum for that downtrend. >> No, fantastic Katy. Appreciate that. Let's talk gold. Let's talk silver. You talked to you mentioned platinum earlier as well. Um let's start with gold. We we we love gold on this channel and we've been really happy with the moves up to 3500. Now we're maybe starting to get a little concerned because gold is moving sideways, but it's trending lower. Can you put some perspective around that for us? Should we really be concerned or is this just normal? I I would say TBD. Um so there there's been a loss of upside momentum of course within in the secular and even cyclical uptrends that's given way to this trading range that's been in place since sort of April May. The trading range has not given way to any kind of breakdown. So it certainly could prove to be a pause to refresh this cyclical secular uptrend in the price of gold. Uh we are watching very closely just some key levels that serve as the boundaries of this trading range. On the lower end it's around 3,300. On the upper end it's around 3450. And within those confines the bias to us is neutral and we would hold a long-term gold position. We also like gold for its diversification. We in our ETF have a small position in gold via the GLDM ETF or fund and we're very comfortable with that longer term exposure because of that secular uptrend being still intact >> with the same apply to silver then as well. >> We there too have a long-term uptrend that's more gradual and perhaps even therein more sustainable than what we had seen previously in gold. So, it's stairstepping higher on a long-term basis. Just pull up a monthly chart and you'll see that. And we have had recent catalysts even in terms of a breakout that was intermediate term in nature. So, we're constructive also on the price of silver. It doesn't have any major long-term sell signals. There's some shortterm sell signals that have already given way to a pullback and consolidation. So, we're respecting those as well as saying, "Okay, well, maybe if you're looking to add exposure, you might wait with that in mind, but nothing to suggest that that longer term uptrend is in jeopardy." >> No, I think that's all we want to hear. And the next unfair question is like when when $50, Katie, um, >> I wish I knew. >> I think that's what everybody's waiting for. Fantastic. Um, you you mentioned platinum and I've been hearing platinum quite a bit on our channel in the last, let's say, three, four weeks. U people are getting quite excited about platinum. Should we be? Is there is is it the right time to be maybe looking at platinum? >> Well, I think we should be looking at it from a long-term perspective. I don't think we have the best re-entry. We saw a great triangle breakout, a very long-term triangle breakout by platinum and that occurred early stages was sort of March into April. We saw that breakout unfold and that was pretty actionable. Gave way to very strong upside follow-through. Now we're in retracement mode. So platinum has I think room to the downside near term and therein we're saying let's just wait for a better entry for those that aren't exposed and we've already recommended reducing for those that were and uh we're just trying to time our entry I think is is the way to put it for platinum but it is a very encouraging long-term triangle breakout and the triangles we have found to be among the higher probability breakouts that we see in the charts. So, we're encouraged by that. >> Yeah. Are you applying ratios at all when you look at it? Like a lot of our guests mentioned gold to platinum used to be almost at odd par and now platinum is like half the price or a third almost of the price of uh of gold right now. Um do you see that coming back to sort of a a par level like what do you call it one? >> You know I I haven't actually looked at that ratio in particular. We do watch gold versus silver and the way we think of it is maybe a little bit different. We think of it more in terms of uh the high beta versus low beta. So we think of silver as being a little higher beta perhaps than gold. So gold is maybe seen as as the defaulted position for precious metals. It's you know a proven safe haven etc. in the same way that we almost would look at Bitcoin versus Ether. Um so as sort of lower beta versus high higher beta within that category. Um, so that's how we're using it more as a read on sentiment within the precious metals complex. And we've had a bit of a sort of risk on move in that way and that silver has has done better uh recently. And yet if we saw the breakdown uh in gold, you know, we we could see that change too because then of course that might impact silver as well just in terms of market sentiment. Unfortunately, we have like only one minute left for oil, but I think it's a super important commodity uh with a geopolitical implications because right now it's being used between Russia, India, and China. It's sort of been used as a as a weapon. Let's let's just say that. Um what do you make of oil $62 a barrel right now? Uh how low will it go? Yeah, I mean we do believe that a major low is probably already in place for crude oil and that's evident in the monthly chart. So the monthly indicators show a long-term oversold indication uh associated with those lows with out. we don't have um you know or a decisive bullish reversal by any stretch that would happen into the high 70s. Uh but we do think there's potential for that beyond the near term. In the near term a pullback is underway and there is some support for crude oil at least for WTI right around $60 a barrel. If that support was discovered then that could be another step towards establishing the long-term low. >> Fantastic Katie. tremendously appreciate you joining us. Like where can we send our audience to follow more of your work, >> but we are active or somewhat active on X or Twitter. So Stockton Katie, that's one way to find us. And then also we have on our website the ability for folks to sign up for a trial of our research, a free trial for a month. And the website is fairleadstrategies.com. We of course also have the TAC ETF that I encourage everybody to uh learn more about on fairleadfunds.com. By all means, we're excited to share our knowledge about technical analysis and you'll find that we're very open source in our discipline and methodology and happy to educate those that are new to the discipline. >> Fantastic. Awesome. Katie, thank you so much. It was a great pleasure having you on and everybody else. Thanks so much for tuning in to Sore Financially. I tremendously enjoyed the conversation with Katie. If you did as well, please leave a like, leave a comment down below. What do you think of her technical analysis? And do you agree where where are we headed? What's the trend? What is your opinion? Like taking try taking the emotion out of it. Let's see if how far we can get there. Um really really appreciate you watching. Thanks so much. Don't forget to hit the like and subscribe button and we'll be back with lots more here on Sore Financially. Take care out there. [Music]
Don’t Wish for Fed Cuts: Crash Trigger This Fall I Katie Stockton
Summary
Transcript
It is a very strange day in the markets. The Dow Jones just hit another record high. The S&P 500 is losing momentum. MAGA caps are dropping and the commodities are getting slaughtered. Oil is down. Gold is down. Silver is dropping about 2% as we speak today. What is happening? We have invited a phenomenal guest to help shed some light shed some light onto market fundamentals and also just some technicals. What is happening? What should we be concerned? What does uh what what will the future tell us? It's Katie Stockton. She's the founder and managing partner over at Fairlead Strategies and I'm really looking forward to speaking with her. We've had a lot of or we've had a number of technical analysts here on the channel. Christopher Mulan um just to name one for example and I'm really like their analysis because it's supposed to take the emotion out of investing. So we'll we'll see if we can achieve that again in our conversation today and uh we're really curious what her outlook is for the rest of the year. Of course, before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and it's a free way to support our channel. So, thanks so much for doing that. Now, Katie, it is great to have you on the program. Thanks so much for joining us. >> Of course, glad to be with you. >> Yeah, really looking forward to this, Katie. But we got to take the first couple minutes just to introduce you properly to the channel because I really want to see where you're coming from, meaning like where's your like your line of thinking? Tell us a bit more about yourself and tell us about Fairle real quick. >> Of course. So, Fairlead Strategies is probably best described as an independent research firm, but we also manage an ETF called the Fairle Tactical Sector ETF or TAC TACK and it originated in 2018 Fair Lead. Before Fair Lead, I was on Wall Street as a publishing technical strategist. So, I've always pretty much been focused on technical analysis in my career. I'm a CMT, which is basically a chartered market technician, similar to a CFA, uh, but we focus on charts. We focus on price action. And it's the focus on price action and the supply and demand for securities that does help us keep those emotions out of things. We are watching trends. We're watching momentum. We're watching market sentiment and we're letting those guide our decisions as opposed to the company's fundamentals in the equity markets or supply and demand for the actual products, that type of thing. So, it's really the securities that are publicly traded that we care the most about. And in our research, we're writing on just about anything that trades. So we we have probably built our reputation around US equities, but we do cover on a regular basis ETFs, we cover gold, we cover crude oil, we often look at silver, platinum, things of that nature. So we're covering just about anything that is out there and impacts equities. >> Perfect. Yeah, really looking forward to discussing all of the above with you there, Katie. um in in in today's markets like technical technical analysis is as you said supposed to take out the emotional component how does it compare to fundamental analysis these days especially given the uncertainty that we're looking at >> I would say they don't necessarily compare but they complement one another and um I think about technical analysis as serving a real need in the investment community in that fundamentals will often be released to their data on a quarterly basis. So technicals can help help fill in those blanks from a shorter term perspective and they can also help understand we call this navigating the gap when a stock or a commodity or fixed income is acting out of line with expectations from either a fundamental or macro perspective because like it or not the the investors behavior is what's driving these these price trends And the behavior is influenced by any number of factors. And sometimes unfortunately people aren't making decisions that are well aligned with what expectations are based on that company's fundamentals etc. Even yields don't seem to act the way they should based on the speculation around the Fed meeting and what have you. So we try to navigate that gap by using the charts to understand what the supply and demand dynamics are and also to understand what key levels are in play, support or resistance levels and then trend and momentum are very important to our work as well. >> Yeah, you you just mentioned a couple indicators um already. I was going to just ask you as a followup to to get the holistic picture here like what are some of the go-to indicators that you're looking at um that that work in this current environment? You know that it's funny because the methodology that we've had we've had for many years and it's because it is mathematically based on price. There's no need to really change and adapt to a different market with different indicators. Uh but certainly the indicators will take on different characters in different environments. For example, in a trading range environment, we might give more weight to an overbought oversold metric. Whereas in a trending environment, we might give more weight to things like moving averages. The way I like to categorize the indicators that we use would be trend falling or momentum, overbought, oversold indicators, and relative strength tools. But then we also would enhance all of that with the analysis of support and resistance looking often for breakdowns and breakouts as catalysts. And then the market internal measures. So that would be things like sentiment and breath and leadership and volume. Those will help us understand what the influences are in terms of investor behavior behavior collectively driving these moves. >> Yeah. Really interesting. Like you you mentioned overbought and that's always a term I see. I I stumble over. This is like oh this is overbought yet the stock keeps going up and I I look at the S&P 500. I personally think it's way overbought but that's my personal opinion. Probably a bit of emotion in there as well and yet it keeps going up. Can can you define just overbought for me perhaps? like what does it mean and uh how do we identify it? >> It's a bit of a misnomer honestly. It's a reading on what we're using as a stochastic oscillator and some people might use something called an RSI for that same reading and there are multiple measures that we can use to get to an overbought oversold takeaway. The stochastic oscillator that we use in particular logs an overbought reading above 80% and an oversold one below 20%. The calculation stems from price action. So it's looking at where prices are relative to a high low spread. If we're seeing, you know, the S&P 500 for one continually closing near the high end of that range, it becomes so-called more and more overbought to the point where it can get all the way to 100%. Now, that is not necessarily bearish, and that's what I think you're you're noting. It is really a reflection of momentum. So an overbought reading should be associated with positive momentum especially breakouts. Breakouts almost always have an overbought indication alongside them. So the overbought condition is not a sell signal in our work. It's when we see the overbought condition give way to something less than that when the stochastics fall back below 80% that we feel we have an overbought sell signal. And that's the action item and that's what we don't have for the equity market right now. >> Yeah, that's yeah, we we'll we'll get to that in a second because I really want to get your market take as well. But I'm just working on demystifying technical analysis for our audience here a little bit. If if there was one thing you would say to our audience like don't be afraid of technical analysis like what would it be like can we demystify together? >> Well, I mean keeping it simple is really key in in the discipline. It's something I learned very early on. If you find yourself using too many indicators, things that will be duplicative in their takeaways, as an example, maybe you're using both the RSI and the stochastic oscillator as an example. Um, you know, that's where it gets to be um dangerous in a way where you can let the confirmation biases, I guess, infiltrate your work. So, keeping it simple is really key. And so when somebody's just getting into technical analysis, I tell them it almost doesn't really matter what they have in terms of their toolbox at at the beginning just to look at bar charts or price charts every day to have a little bit of their screen dedicated to it. you're starting the process that way and maybe throw in a moving average and see how that acts alongside price and acts to I'd say eliminate the noise that is evident in the bar charts. So to keep it simple, start with something that is very digestible and that gives that nice visual element of what's happening in terms of the price trend. So start starting there and then you can always add other indicators that you feel add value but cautioning against using things that are duplicative. >> What do you make of the fear and greed index that CNN publishes? I'm curious. I've been quoting it a couple of times in the past here on our channel. I'm not quite sure what to make of it. So I'm curious like how would you interpret it? >> I think it's great. I you know there's a lot of ways to measure market sentiment and the fear and greed index has taken seven components and rolled them up into one indicator and these are all track uh I'd say transactional sentiment metrics meaning it's saying what are people doing not what are they saying because there are also those investor polls out there that would help us understand maybe what the feelings are but the transactional gauges I think are the most informational and that's what that fear and greed index encompasses and it's just another oscillator right when we see a 75% plus reading that's an overbought reading in market sentiment and vice versa. So for for the same way that we're looking at the stochastics maybe a downturn is a bit more concerning than that first 75% plus reading because bullishness even extreme bullishness isn't necessarily bearish. It's when you see that bullishness challenged by something and also then it filtrates into momentum. >> No, fantastic. No, it was a personal question almost because I keep looking at from time to time and I'm trying to make sense of it and where to put it like how how important or how valid is it as a technical indicator. I'd say >> I think it's it's all about measuring extremes and that's how we look at a lot of the market internal measures things like breath the cumulative advanced decline line. we generally want to see confirmation. But in metrics that are oscillating, for one, we could talk about the percentage of stocks above their 50-day moving averages. When those reach extremes, there is information in that. And then when also we see multiple extremes logged by multiple measures of market sentiment, breath, etc. That's when we can have a very powerful takeaway that things might be overdone, overstretched on the upside or downside. >> Perfect. I think we've established that you definitely know a lot about techn technical analysis and way more than I do. That's why I'm really curious about your calls now um on on the general market. Let's maybe start there. I mentioned Dow Jones S&P 500 pretty much trading near record highs. I think the Dow Jones just this morning marked a new record high as well. What what is your market uh market call for the rest of the year here, Katie? >> Well, we don't typically assign a year-end price target. It it the technicals aren't predictive in that sense and really nobody knows, right, where the S&P 500 will end the year, but we try to keep the trends on our side and we try to do that over multiple time frames. So we always have a long-term view and then we let the sort of shortterm inputs tone uh our biases within that framework. The the long-term view is bullish for the major indices in the US. That includes the Dow industrials, the S&P 500. It even includes the Russell 2000, which while it has been in a secular trading range, it does have a positive long-term momentum shift that we've seen. the momentum gauges on the monthly charts point higher and yet we've seen a downtick in momentum certainly short to intermediate term it's not enough to generate any kind of meaningful breakdowns in any of the major indices in fact we do have mostly them close to to new highs even all-time highs so we want to defer to that sort of price momentum that has been very persistent in this environment even as the indicators suggest otherwise. So, what we've done and and this goes along the lines of keeping things simple is to say we just really want to keep the 20-day moving average on our side. The 20-day moving average is a good way to visualize the short to intermediate term trend within a longer term context. And when it rolls over, that's when we'll start to feel like there's enough of a loss of momentum to warrant some repositioning. The loss of momentum that we've seen up to this point, it began in in early June. It's been managed very, very well. Part of that has come from the contribution from the mega cap stocks. So, we're watching the 20-day moving averages. They still mostly point higher. We've seen them waver for small and midcap proxies. So that's something that suggests that breath is deteriorating to some degree, but not enough to warrant repositioning at this time or to suggest that people need to be extremely hedged. Maybe some partial hedges or partial reductions in exposure as we see the loss of momentum manifest itself in those uh 20 days rolling over. >> How does a loss of momentum correlate with seasonality? You just mentioned mid June and I immediately went like well that's the start of summer at least in Europe. Um what what does it mean? Is there a correlation to seasonality as well and what do you expect come uh post Labor Day? What is it? September 2nd I think is the day after Labor Day. Can we expect another rally with proper momentum and volumes? >> I you know I think it's funny. Seasonals do certainly impact our I'd say biases but we're not going to make a decision based on seasonals. rather we will adhere to the momentum gauges over those indications but we always have the seasonal influences in mind and there is always that sell in May and go away which suggests that you come back in October and the reason for that is that September October even now at times August will carry down downside volatility meaning we see some kind of corrective price action typically over those three months that's meaningful but then it often gives way to very nice entry point ahead of a Q4 recovery. So, a loss of momentum would be in following with heightened volatility. Whether it's August at this point or September, we obviously don't know, but we will be mindful of that loss of momentum once it becomes evident in the 20 days because of the seasonal influences in part. So, we do let it influence our our sort of biases in that way. It will make us more respectful of a loss of momentum than perhaps otherwise. And uh we we will defer to the longer term uptrend though. So if we see a what appears to be a short-lived pullback, I think we'll probably see investors step right back in on that because we really haven't seen much of a pullback since that April low was established. Yeah, I believe it you you actually called the April low and told people to to buy back into it if I'm not mistaken. I hope I'm not, you know, misinterpreting anything I've picked up while researching for this interview here. But um how did you sort of react to that massive macro shock being the tariff announcement? How does it being reflected in the technical analysis in general? >> Well, those kinds of u I'd say headline events can influence the market internals such that they become extreme. So, uh, when I referenced the multiple extremes and things like breath and sentiment, that's what we had right around the April low. So, those were oversold extremes that we saw from multiple inputs. And that's when we pay attention. And then when also you see the uptick in momentum, perhaps it's coming down on less momentum, that can also enhance the uh possibility for a turning point. So we had good weight of the evidence in April that at least a shortterm low was being established. I would say once we passed May though the indicators started to diverge from the price action in a pretty frustrating way. Um, so ultimately we thought that we would see the market roll over and it just kept going higher and it reminded us to I'd say respect the action from the mega caps which have been major contributors this year as in 2023 and 2024 to the returns for the S&P 500 for also the NASDAQ 100 year to date. So we want to respect the action in the MAGA caps which has been mostly bullish. We have some minor signs of upside exhaustion there, but just to suggest that we'll see consolidation, maybe a seasonal pullback and then something that should give way to a better entry. So, we're very uh I'd say respectful of those those heavy weights. >> You you said something interesting in your interview at C on CNBC yesterday. It's like and you you dropped it in a side note is that the market shouldn't hope for a Fed cut or it shouldn't like might have the wrong expectation. like maybe you can elaborate on that cuz I thought it was an interesting statement and unfortunately the host sort of brushed over it and moved on in the conversation but I thought it was an interesting tidbit like why do you think the market will be disappointed in a Fed cut? Well, it's funny because the market seems to be welcoming a Fed cut, but it's really welcomed more from a macro standpoint than it should be from an investing standpoint because they these sort of Fed write rate cycles as they unfold. When you see a a peak in the Fed funds rate, it tends to be u something that happens ahead of a recession or at least ahead of some kind of corrective action in the equity market. So it's very common to see a weaker equity market on the back of the initiation of the Fed rate cuts. So in a way we we should be careful what we wish for. There there's other influences that it's out of our wheelhouse, but it maybe it's partly related to the actual level, not just the trend. Uh, but I would say that we shouldn't necessarily welcome it, especially after such a huge runup for the S&P 500. For other reasons, perhaps we should for the job market for one, for consumer sentiment as another, but for the S&P 500, I think if we see one, it it might be something that would be sold u by investors. >> Yeah. Like same question almost for the treasuries as well. like what do you expect them to do if that the Fed decides to cut? We're all expecting a 25 basis point cut here in September. What do you expect they will or how they will behave? >> Yeah, I mean you would expect them to stay positively correlated to the Fed funds rate. So you would expect them to probably start to move lower within their range that it has indeed been a very persistent range for at least 10ear Treasury yields. they've been mostly sideways for uh years now even and so this backing and filling that we've seen has been reflective of indecisiveness in a way on that front. So we would expect that range or at least the smaller intermediate term range that we're watching to resolve lower but we're not going to necessarily position for that but rather react to it. And that's something that's uh I'd say part of our methodology is that we're more reactive than we are anticipatory. Um so we we can you know assign probabilities to things but not until we see the breakdown or see a breakout would we react to that because then you're running the risk of being too early um and just on the raw wrong side of things. So, if we were to see a breakdown in yields, of course, that would be something uh that we would react to. >> Just as a hypothetical, and again, this is not financial advice or anything, but if I were to tell you on September 1st, for example, I'd go I'd go short the S&P into the Fed meeting, I'll go long bonds into the Fed meeting, what would you tell me? >> Well, at on September 1st, you said, >> "Yeah, I'm just trying to mark it somewhere because when what's the Fed meeting?" I think September 20th. September 17th, I believe. >> Yeah. So, I would say um I mean, listen, it's a bet on what they're going to do, and I I can't say I have any visibility into what they're going to do, but if if indeed they do cut rates, um I think it's more likely a trade that will work out for you, um at least to capture the downside volatility that does tend to unfold September or October. Um and then perhaps just another rebound for treasuries which have also of course been uh rangebound. We've seen TLT as one proxy for treasuries just backing and filling around their 200 day moving average above the 200 day moving average. It gets more interesting at least in price terms. U but of course we're we have to consider them in terms of total return. If you look at a ratio for treasuries versus equities, I'd say it's still too early to feel confident that we're going to get any kind of outperformance from fixed income over equities at this time. But there are oversold indications. And if we were to see that yield yield, I shouldn't use that word manifest itself in momentum behind the ratio, then that would warrant uh building your relative exposure to fixed income. We just don't quite have that confidence yet that that's there. But if it unfolds, whether it's ahead of or on the back of the Fed meeting, it would be an interesting shift because it's been pretty persistent in terms of underperformance by fixed income. >> No, I appreciate you humoring my question here. I was just, you know, trying to put some context around, make it relatable like how our audience could potentially look at the situation as well. Um, before we get to the commodity, there's one more asset we need to discuss real quick, Katie, and that's the US dollar. Um what do you what do you make of it? Uh I think it's at around the Dixie is 98 at 98 right now as we speak. Um is it strong? Is it weak? What's the trend? >> You know, it's a cyclical downtrend and we did see long-term breakdowns for the dollar index that we were very respectful of. There is support though. If you draw way way back, there is an uptrend channel like a secular uptrend channel that shows some support not too far from the recent lows in the dollar index. So, it's possible that we see support discovery here that's more meaningful than what we've already seen. The intermediate term momentum has actually shifted to the upside to support a relief rally for the dollar, but we are viewing this action within the context of the cyclical downtrend at this time. So, we're respecting the primary trend, but also acknowledging that the support discovery has been, you know, sort of there's an inkling of it. And then also we have seen certainly a loss of downside momentum for that downtrend. >> No, fantastic Katy. Appreciate that. Let's talk gold. Let's talk silver. You talked to you mentioned platinum earlier as well. Um let's start with gold. We we we love gold on this channel and we've been really happy with the moves up to 3500. Now we're maybe starting to get a little concerned because gold is moving sideways, but it's trending lower. Can you put some perspective around that for us? Should we really be concerned or is this just normal? I I would say TBD. Um so there there's been a loss of upside momentum of course within in the secular and even cyclical uptrends that's given way to this trading range that's been in place since sort of April May. The trading range has not given way to any kind of breakdown. So it certainly could prove to be a pause to refresh this cyclical secular uptrend in the price of gold. Uh we are watching very closely just some key levels that serve as the boundaries of this trading range. On the lower end it's around 3,300. On the upper end it's around 3450. And within those confines the bias to us is neutral and we would hold a long-term gold position. We also like gold for its diversification. We in our ETF have a small position in gold via the GLDM ETF or fund and we're very comfortable with that longer term exposure because of that secular uptrend being still intact >> with the same apply to silver then as well. >> We there too have a long-term uptrend that's more gradual and perhaps even therein more sustainable than what we had seen previously in gold. So, it's stairstepping higher on a long-term basis. Just pull up a monthly chart and you'll see that. And we have had recent catalysts even in terms of a breakout that was intermediate term in nature. So, we're constructive also on the price of silver. It doesn't have any major long-term sell signals. There's some shortterm sell signals that have already given way to a pullback and consolidation. So, we're respecting those as well as saying, "Okay, well, maybe if you're looking to add exposure, you might wait with that in mind, but nothing to suggest that that longer term uptrend is in jeopardy." >> No, I think that's all we want to hear. And the next unfair question is like when when $50, Katie, um, >> I wish I knew. >> I think that's what everybody's waiting for. Fantastic. Um, you you mentioned platinum and I've been hearing platinum quite a bit on our channel in the last, let's say, three, four weeks. U people are getting quite excited about platinum. Should we be? Is there is is it the right time to be maybe looking at platinum? >> Well, I think we should be looking at it from a long-term perspective. I don't think we have the best re-entry. We saw a great triangle breakout, a very long-term triangle breakout by platinum and that occurred early stages was sort of March into April. We saw that breakout unfold and that was pretty actionable. Gave way to very strong upside follow-through. Now we're in retracement mode. So platinum has I think room to the downside near term and therein we're saying let's just wait for a better entry for those that aren't exposed and we've already recommended reducing for those that were and uh we're just trying to time our entry I think is is the way to put it for platinum but it is a very encouraging long-term triangle breakout and the triangles we have found to be among the higher probability breakouts that we see in the charts. So, we're encouraged by that. >> Yeah. Are you applying ratios at all when you look at it? Like a lot of our guests mentioned gold to platinum used to be almost at odd par and now platinum is like half the price or a third almost of the price of uh of gold right now. Um do you see that coming back to sort of a a par level like what do you call it one? >> You know I I haven't actually looked at that ratio in particular. We do watch gold versus silver and the way we think of it is maybe a little bit different. We think of it more in terms of uh the high beta versus low beta. So we think of silver as being a little higher beta perhaps than gold. So gold is maybe seen as as the defaulted position for precious metals. It's you know a proven safe haven etc. in the same way that we almost would look at Bitcoin versus Ether. Um so as sort of lower beta versus high higher beta within that category. Um, so that's how we're using it more as a read on sentiment within the precious metals complex. And we've had a bit of a sort of risk on move in that way and that silver has has done better uh recently. And yet if we saw the breakdown uh in gold, you know, we we could see that change too because then of course that might impact silver as well just in terms of market sentiment. Unfortunately, we have like only one minute left for oil, but I think it's a super important commodity uh with a geopolitical implications because right now it's being used between Russia, India, and China. It's sort of been used as a as a weapon. Let's let's just say that. Um what do you make of oil $62 a barrel right now? Uh how low will it go? Yeah, I mean we do believe that a major low is probably already in place for crude oil and that's evident in the monthly chart. So the monthly indicators show a long-term oversold indication uh associated with those lows with out. we don't have um you know or a decisive bullish reversal by any stretch that would happen into the high 70s. Uh but we do think there's potential for that beyond the near term. In the near term a pullback is underway and there is some support for crude oil at least for WTI right around $60 a barrel. If that support was discovered then that could be another step towards establishing the long-term low. >> Fantastic Katie. tremendously appreciate you joining us. Like where can we send our audience to follow more of your work, >> but we are active or somewhat active on X or Twitter. So Stockton Katie, that's one way to find us. And then also we have on our website the ability for folks to sign up for a trial of our research, a free trial for a month. And the website is fairleadstrategies.com. We of course also have the TAC ETF that I encourage everybody to uh learn more about on fairleadfunds.com. By all means, we're excited to share our knowledge about technical analysis and you'll find that we're very open source in our discipline and methodology and happy to educate those that are new to the discipline. >> Fantastic. Awesome. Katie, thank you so much. It was a great pleasure having you on and everybody else. Thanks so much for tuning in to Sore Financially. I tremendously enjoyed the conversation with Katie. If you did as well, please leave a like, leave a comment down below. What do you think of her technical analysis? And do you agree where where are we headed? What's the trend? What is your opinion? Like taking try taking the emotion out of it. Let's see if how far we can get there. Um really really appreciate you watching. Thanks so much. Don't forget to hit the like and subscribe button and we'll be back with lots more here on Sore Financially. Take care out there. [Music]