Excess Returns
The Signal Before the Spike | Katie Stockton on What the Charts Tell Us About What Comes Next
Most Important Insight
The convergence of weekly DeMark exhaustion signals and extreme momentum gaps relative to 50-day moving averages suggests a high probability of a multi-week corrective phase in US equities starting in April 2026, despite the underlying secular bull market trend.
Most Original Insight
The Ichimoku Cloud's 'cloud' thickness serves as a superior volatility-adjusted support metric compared to traditional moving averages, currently indicating that the S&P 500 has a much deeper 'true' floor than the 50-day moving average suggests.
Key Points
- The S&P 500 is currently exhibiting a '13' exhaustion count on the weekly DeMark Indicators, a signal that historically precedes significant trend reversals or sideways consolidations.
- Gold has completed a multi-year base breakout, transitioning from a neutral long-term stance to a secular bullish phase with technical targets suggesting sustained upside through 2026.
- Bitcoin is characterized as being in a 'high-handle' consolidation pattern following its recent peak, which Stockton interprets as a healthy digestion of gains rather than a structural top.
- Market breadth has improved significantly since late 2025, with the percentage of stocks above their 200-day moving averages reaching levels that confirm the validity of the broader bull market.
- The 10-year Treasury yield is currently testing critical resistance at the 4.5% to 4.7% range, with technical exhaustion suggesting a potential retreat that would favor growth-oriented sectors.
- Relative strength analysis shows the Technology sector (XLK) is overextended versus the S&P 500, prompting a tactical rotation into defensive sectors like Consumer Staples and Healthcare.
- The Fairlead Tactical Sector ETF (TACK) is utilizing a systematic approach to shift exposure away from exhausted momentum leaders toward sectors showing fresh 'buy' signals on the daily MACD.
- Stockton emphasizes that the 'Monthly MACD' remains in a positive configuration, which serves as the primary technical anchor for maintaining a long-term bullish bias despite short-term volatility.
Investment Implications
| Asset / Sector / Instrument | Action | Source | Notes |
|---|---|---|---|
| Gold | BUY | explicit | The breakout from a multi-year range provides a high-conviction entry point for a new secular uptrend. |
| Bitcoin | BUY | implicit | Current consolidation is viewed as a bullish 'handle' formation preceding the next leg higher. |
| Consumer Staples (XLP) | BUY | implicit | Identified as a primary beneficiary of tactical rotation as investors seek defensive positioning. |
| S&P 500 | HOLD | explicit | Long-term secular trend is bullish, but short-term exhaustion signals warrant caution on new entries. |
| US 10Y Treasuries | HOLD | implicit | Yields are at a major resistance cluster; a failure to break higher would support a long position in bonds. |
| Technology Sector (XLK) | SELL | implicit | Relative strength is overextended and DeMark exhaustion counts suggest a period of underperformance. |
Hang on a sec…
- Stockton's heavy reliance on DeMark '13' counts as a primary exhaustion signal may lead to premature exiting of positions in high-regime momentum markets where 'overbought' can persist for months.
- The assertion that market breadth 'catching up' is a late-cycle confirmation is a double-edged sword; historically, this can also signal the final 'blow-off top' phase rather than a sustainable expansion.
- The claim that the Ichimoku Cloud provides more reliable support than the 200-day moving average is highly subjective and lacks back-tested comparative data within the discussion to prove its superior predictive power.