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Tech Strategist Katie Stockton: Market Volatility to Be 'Short-Lived'


By    |   Friday, 09 February 2018 10:45 AM

Technical strategist Katie Stockton is trying to calm jittery investors by predicting that the recent stock plunge isn’t necessarily the end of the long bull-run rally and start of a bear-market reversal.

A "correction" is a Wall Street term for when an index like the Dow industrials or the Nasdaq — or an individual stock — falls 10 percent from its most-recent high, the Associated Press explained. 

The Dow fell 1,032.89 points Thursday to 23,860.46, which is 10.4 percent below its record close of 26,616.71 set on January 26.

A correction is not the same as a bear market, which is defined as when a stock index or individual stock falls 20 percent from its most-recent peak.

Even the most bullish of market strategists will say a correction is ultimately healthy for a market because it removes some of the froth and speculation.

"It's certainly a loss of momentum. That's undeniable," Stockton, founder and managing partner at Fairlead Strategies, told CNBC.

She said investors should expect "short-lived" volatility in the market.

At the heart of this week’s pullback in the market has been a rise in U.S. bond yields due to growing expectations that a robustly performing economy will lead to higher inflation and a steady rise in official interest rates over this year.

Investors also point to additional pressure from the violent unwinding of trades linked to bets on volatility staying low.

The market’s main gauge of volatility, the CBOE Volatility Index .VIX, was at 30.5 points on Friday, down 3 from Thursday and well below the two-and-a-half-year high of 50.30 on Tuesday.

The downturn in equities had been long awaited by investors, after a period of strong and fast gains. The S&P’s correction is the fifth of this bull market, according to Yardeni Research. The last bear market was during the 2008 financial crisis.

"What we now want to look for is signs of downward exhaustion," Stockton told "Squawk Box."

In a January note to clients, Stockton wrote that she ultimately sees gains for 2018, CNBC.com explained. But she warned of "deeper pullbacks" that will "keep the slope of the uptrend in check this year" and predicted gains as "more modest" than the 19.4 percent advance for the S&P 500 in 2017.

Wall Street’s three main indexes rose more than 1 percent on Friday, bouncing back from a steep selloff this week that pushed the Dow Jones Industrial Average and the S&P 500 into correction territory, Reuters explained.

Stocks had plunged 4 percent on Thursday, sending the Dow and the S&P more than 10 percent below their record highs on Jan. 26 and adding to the sense that rising U.S. government bond yields had begun a major correction to nine years of near uninterrupted gains for Wall Street.

The yield on benchmark 10-year U.S. Treasuries US10YT=RR, which tends to be the driver of global borrowing costs, was hovering at 2.85 percent, set to end the week little changed since hitting a near a four-year high of 2.885 percent Monday.

“The fact that Monday’s lows were breached (on Thursday)signals more trouble ahead and rallies are likely to give way to rising bond yields,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

“We’re cheap now, but it’s just a matter of much more cheaper we have to get to attract buyers,” said Robert Pavlik, chief investment strategist at SlateStone Wealth.

(Newsmax wire services contributed to this report).

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Technical strategist Katie Stockton is trying to calm jittery investors by predicting that the recent stock plunge isn't necessarily the end of the long bull-run rally and start of a bear-market reversal."It's certainly a loss of momentum. That's undeniable," Stockton,...
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Friday, 09 February 2018 10:45 AM
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