Market To Pullback By May, Then Race To New Summer Highs | Mark Newton, Fundstrat

**Mark Newton** (0:00)
Whenever you get these V-shape type moves, it's always tricky, it's very difficult to make money. People normally try to buy dips for a certain period of time, and then they throw in the towel and start to sell. And as fear reaches extremes, that's normally when we start to rally, and very few people want to buy into the rallies, they start selling into them.

**Adam Taggart** (0:27)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. When today's guest was back on this program in January, he predicted that stocks would soon experience a 10% correction, that the precious metals would experience a big pullback, and that oil had found a bottom. Well, he was right.
And this was before the war with Iran broke out.
So how has the war impacted his outlook for the coming quarter? To find out, we're fortunate to welcome back to the program Mark Newton, head of technical strategy at market research firm Fundstrat, where he works with its founder, Tom Lee. Mark, thanks so much for joining us today.

**Mark Newton** (1:04)
My pleasure. Thanks for having me back, Adam. Good to see you.

**Adam Taggart** (1:07)
Well, thanks, Mark. It's a pleasure to have you back. And folks have really enjoyed your quarterly outlooks, Mark. So I'm sure this will be no exception. Folks are going to love this one. I do just want to underscore the props I gave you there in the intro.
Now, you didn't know that we were, well, to my knowledge, you didn't know that we were going to go to war with Iran in a month after we talked. But all the trends that you thought were in place and were going to happen pretty much happened.

**Mark Newton** (1:39)
It's been a remarkable time. We've had, I guess, not dissimilar to last year, an early spring sell-off that caught a lot of people off guard for different reasons, and now just a remarkable snapback rally. We've been up 3 percent for each of the last three weeks. Quite unusual, up 12 percent now over the last 14 trading days. That kind of thing doesn't happen quite that often.

**Adam Taggart** (2:06)
I think it's the most violent rally, whatever you want to say, since the 80s. Did I hear that?

**Mark Newton** (2:13)
I think the quickness with which we've recovered certainly has set some records. I think it's never happened in 11 days where the market's gone from a 100-day low to a 200-day high.
I think the next closest was October of 2014, but certainly one for the record books and pushing aggressively back to new all-time highs.

**Adam Taggart** (2:39)
All right, so obviously, this is happening.
Well, why don't we start with this? Why is it happening? I mean, obviously, one explanation is that the markets are basically pricing in a near-term end to this war.
Oil kind of doing the same. It's down from its highs from a few weeks back. On the day we're talking, it's up a couple percent. It's kind of hovering around Brent crude futures are hovering around 90 So it doesn't seem to be as sanguine about the war as the markets, I think, but you tell me.

**Mark Newton** (3:25)
Look, I think the market gave us a couple of clear indications back in late March that it could start to stabilize and turn higher, that maybe many investors did not quickly catch on to.
For those that use technicals, we did see a meaningful amount of breadth improvement which really started right around mid-March, where you look at things like the percentage of stocks above their 20-day moving average in 50, really started to jump pretty substantially, and that was interesting and something that the broader S&P really didn't showcase properly if you're looking at the markets which continue to drop, but yet far fewer stocks were hitting new lows, and that's almost always something that happens when markets are approaching a bottom. The same thing happens, by the way, when you're approaching a top, and we also saw that in the middle part of January, where fewer and fewer stocks were participating and starting to turn down.
The other is that we started to see some real evidence of the defensive sectors really starting to deteriorate, and sectors like consumer staples, which according to my work, we're one of the few things that actually did show the potential for a sell-off, just based on risk-off, risk-on type positioning. When the defensive sectors really start to gain in strength, that's normally a time when you have to be a little bit more cautious or expect you can see a possible trend break. We saw exactly the opposite, honestly, in March. We saw consumer staples go straight down.