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Fairlead’s Katie Stockton expects new market lows in 2023

By:
on Jan 3, 2023
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  • Katie Stockton is the founder and managing partner at Fairlead Strategies.
  • According to the market strategist, 2023 is an inflection year for stocks and a market low is not yet in.
  • The S&P 500 could fall to 3,800 and then 3,500 if there's a major volatility event.

Katie Stockton, the founder and managing partner at Fairlead Strategies, says 2023 could yet see the markets sink to new lows.

Speaking on Tuesday during an interview with CNBC’s ‘Squawk Box’ as trading reopened following the New Year holiday, the technical analyst noted:

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“We were looking for some firmness into the year-end and that was based on the so-called Santa Claus rally which is actually still in force today and tomorrow. So we expect more firmness this week after which I think we can see volatility pick up to the downside.”

2023 is an inflection year

According to the Fairlead founder, 2023 is also an inflection year for stocks, which makes it difficult to predict where the S&P 500 will be at the end of the year. However, the market should watch for some kind of volatility event that marks the bear market low – there are no long term positive divergences that historically signal the low is in yet.

But the capitulation that tends to mark bear market lows is likely to happen within the next 4-6 months, she added.

The Cboe Volatility Index, or VIX, which looks at the stock market’s volatility expectations, is one indicator that warrants a close watch, she noted. On Tuesday, the VIX was testing its 50-day moving average around 28, and Stockton believes a breakout above the resistance line opens up further spike to the next resistance at 35.

Given, this will spell fresh downside volatility for the inversely correlated S&P 500, with support at 3,800 and then 3,500.

Stockton’s comments came as Wall Street traded lower on Tuesday morning. The S&P 500 fell 0.90%, the Dow Jones Industrial average was down 216 points, or 0.65% and the Nasdaq Composite was shedding 1.38%.

Among the day’s highlights, Apple and Tesla were both trading lower at 4.6% and 13.8% respectively ( As highlighted, Tesla shares fell sharpy after its Q4 2022 deliveries miss).

Meanwhile, gold was up at 1,835.90 per ounce. In crypto, Bitcoin was holding around $16,650.