Katie Stockton, founder of Fairlead Strategies, said the S&P 500 may have reached a record high on Wednesday, but the technical setup points to trouble ahead. The broader index hit a fresh intraday high of 6,100.81 in the previous session, surpassing levels reached before the market’s pullback in early December, with technology stocks rising on renewed optimism about the profits promised by Donald Trump’s presidency. But Stockton is skeptical that the recent rebound can be sustained. The technical analyst, who follows price action closely, predicts a 5% to 8% retracement could come soon. Seniors at BTIG, MKM Partners and Morgan Stanley pointed to a deterioration in the market’s internal structure as a sign that the stock market’s rally following weak inflation data this month was over. “We suspect this is a break in the correction, not an end,” Stockton said Wednesday. .SPX 3M Mountain S&P 500 index over the past three months. Stockton’s bearish outlook was based on what she said was some technical indicators had weakened. Using the Elliott Wave Theory, she predicts that stocks are currently in the second phase of a three-part correction — labeled “A,” “B” and “C” — where price movements determine the direction of the market trend. According to Elliott Wave analysis, the market experiences an initial decline, then rebounds, and finally falls into a correction. Stockton said the comeback rally was defined by “fast and furious” movement during the second phase, known as the “B” wave, which suggested it was the opposite of a downtrend. Stockton said another indicator, the McClellan Oscillator, which tracks market breadth, or the number of advancing stocks versus declining ones, suggests the recent rally has been overdone. “These internal market factors are starting to suggest that it’s going to be here,” Stockton said. subside, even start (Wednesday) or (Thursday),” Stockton said. Stockton expects the S&P 500 to likely find support near 5,783, about 5% lower than Wednesday’s broader index. She even predicted the benchmark could test its 200-day moving average, which would represent a roughly 8% decline from the stock’s current levels. What’s Likely to Happen Technical analysts say it’s a safe bet that if the S&P 500 continues to settle clearly above the 6,100 resistance level in the coming days, it will lead to short-term positive indicators for the index. But she expects the overall market to continue to be choppy and sideways in 2025, absorbing and digesting last year’s gains, when the S&P 500 soared more than 23% a year after surging 24% in 2023. Dayton said. “We would prefer to have dry powder on hand to function after what is known as a potential ‘C’ wave adjustment.”
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