Is A Market Breakdown Underway? | Katie Stockton

Summary

Katie Stockton of Fairlead Strategies said the recent sell-off had weakened market technicals, but had not yet confirmed a broad breakdown or ended the long-term uptrend. The key near-term test was whether major indexes—especially the Nasdaq 100—could rebound from support. If they failed to do so, Fairlead would treat the declines as confirmed and expect a deeper, potentially longer correction.

Market outlook and technical framework

• The host cited four stocks in the “G7” mega-cap group as being in bear-market territory from their earlier-year peaks, with the group losing about $4 trillion in market capitalization. He also said more than 60% of S&P 500 stocks were down over 20% from their highs. These were presented as evidence of broadening weakness, although the S&P 500 remained positive for the year.
• The host estimated that AI-related companies were approaching 50% of S&P 500 market capitalization. Stockton acknowledged that weakness in large technology stocks can weigh heavily on the overall index, even if other areas perform better.
• Nasdaq 100: Already below the support level Fairlead was monitoring. S&P 500 (SPX): Still had some room before reaching its comparable support. Stockton said a failure to rebound—particularly in the Nasdaq 100—would strengthen the case that the breakdown was confirmed.
• Fairlead looks for more than a brief move through support: it wants prices to remain below a level for several days or weeks, depending on the chart timeframe. Levels are based mainly on historical support and sometimes moving averages, including Fairlead’s “cloud model.”
• Across the levels being monitored, potential support averaged about 7% below current prices. Stockton described this as a rough measure of downside risk, not a forecast or price target. A break could indicate weaker medium-term momentum and a deeper or more prolonged correction.
• For the S&P 500, Stockton pointed to its 200-day moving average and a Fibonacci retracement around 7,240 as potential support areas; she did not describe a complete “air pocket” below current levels.
• Short-term stochastic indicators showed oversold conditions, which could help support hold or prompt stabilization. But weekly indicators were not deeply oversold, and Fairlead saw no broad-index buy signals. Some countertrend buy signals, including DeMark signals, require a longer decline.
• Stockton’s broad view was that the market remained in a long-term uptrend. Fairlead would watch longer-term indicators such as the monthly MACD, as well as market breadth, sentiment, and credit spreads, to determine whether weakness was becoming a larger trend reversal.
• She did not provide a formal annual forecast. Fairlead’s approach is to respond to current data rather than forecast reversals in advance. She said the bull market was mature and concentrated in technology, which could mean more restrained future returns, but she would rely on momentum indicators rather than assume the trend was ending.
• Credit spreads were described as elevated and uncomfortably close to levels that could signal a more serious risk to stocks. Historically, such spread moves have accompanied substantial corrections or bear markets, sometimes even without a recession. If spreads moved decisively beyond key levels, Stockton said the first half of 2027 could be difficult for equities.
• Near-term sentiment readings were mixed: the Fear and Greed Index was around 25, in the “extreme fear” zone, a potentially positive contrarian signal. Weak breadth was a concern, while a recovery in small-cap breadth was supportive.
• Stockton noted strong fourth-quarter seasonal tendencies, especially in November, and said improving retail-sector charts could support a stronger year-end finish despite technology weakness.

Portfolio positioning and risk management

• Stockton favored maintaining a long-term bullish stance, while using risk controls as conditions evolve. She said Fairlead’s own ETF had shifted to a more cautious position than at any point that year.
• If technology stocks held support, she remained interested in owning them for portfolio growth. If risk signals became more pronounced, Fairlead would consider reducing overall equity exposure and increasing defensive assets.
• Possible hedges included inverse ETFs or exposure to defensive sectors and assets with lower correlation to equities. Stockton framed a pullback within an intact long-term trend as a potentially healthy reset, though a painful one for portfolios.
• She supported diversification based on volatility and correlation, not simply holding different categories for their own sake. Her portfolio comments included modest allocations to:
  • Fixed income, including U.S. Treasuries
  • Gold
  • Crypto or Bitcoin
  • Defensive sectors and selected international opportunities
• Higher bond yields could make fixed income more attractive as a source of income and portfolio ballast. Stockton did not expect investors to abandon equities altogether; allocation should reflect age, risk tolerance, and market conditions. Fairlead had moved partially into Treasuries after being mostly in stocks earlier in the year.
• In Fairlead’s own portfolio, it held both 1–3-year Treasuries and long-term Treasuries, while Stockton said shorter maturities looked relatively more attractive from a technical perspective.
• Fairlead generally favored a smaller international allocation than U.S. equities, but would consider country-specific opportunities if charts showed a breakout. Brazil was cited as an example of a market with a notable breakout.
• Potential shorter-term opportunities included retail, which had positive November seasonality and improving momentum; homebuilders, which are interest-rate-sensitive; and parts of the defense sector.

Gold, oil, and other assets

• Gold remained in a downtrend with negative momentum, but DeMark and other overbought/oversold indicators suggested a possible short-term low or stabilization over the coming weeks.
  • Fairlead’s support levels were about $3,900 per ounce, then $3,600 if the first level failed.
  • Stockton was comfortable with a small gold position for diversification, but did not consider the current downtrend attractive on momentum grounds.
  • To become more constructive, she wanted to see stabilization, evidence that buyers were entering, or a break above short-term resistance such as the 20-day or 50-day moving average. She cautioned against trying to “catch a falling knife.”
• Crude oil: Stockton was monitoring a large, neutral triangle pattern following a shift in long-term upward momentum. A breakout above $105 per barrel for WTI could be a risk signal for stocks, as higher oil prices could weigh on the market.
• The interview also discussed Bitcoin and crypto as possible small portfolio diversifiers, not as large core allocations.

Key assets, sectors, and instruments mentioned

• Equities/indexes: S&P 500 (SPX), Nasdaq 100, small caps, U.S. equities
• Stocks/companies: Apple, Nvidia, Intel, MGM
• Technology: AI-related stocks and ETFs, semiconductors
• Other sectors: Retail, defense, homebuilders, defensive sectors
• Fixed income: U.S. Treasuries, including 1–3-year and long-term maturities; corporate credit spreads
• Commodities/alternatives: Gold, crude oil (WTI), Bitcoin and crypto
• Funds/instruments: Inverse ETFs; QQQ (referred to as “Triple Q”); Fairlead Tactical Sector ETF (TACK); Amplify Fairlead Tactical Bitcoin ETF (BNAV)
• Indicators: 200-day moving average, Fibonacci retracement, stochastic oscillator, DeMark indicators, monthly MACD, VIX, Fear and Greed Index

Other points and disclosures

• The host cited AI-computing demand and data-center construction activity as continuing, referencing comments from Jan Vanek and Craig Fuller. These were examples offered in the discussion, not Fairlead’s technical evidence that stock prices must rise.
• Stockton contributed a chapter on technical analysis to Investment Wisdom for Our Friends and Family, edited by Jenny Harrington and Rebecca Patterson. The book was scheduled for release on November 16, with proceeds going to the Council for Economic Education and the Boys & Girls Club.
• No explicit “not financial advice” disclaimer was given. Stockton discussed Fairlead’s investment process and ETFs; the host also promoted free, no-obligation consultations with Thoughtful Money-endorsed financial advisors.

Presenters and sources

• Presenters: Adam Taggart, host of Thoughtful Money; Katie Stockton, founder and managing partner of Fairlead Strategies.
• Other sources or people referenced: Jan Vanek and Craig Fuller (AI-related activity); Jenny Harrington and Rebecca Patterson (book project).