Katie Stockton Still Sees a Bull Market. So Why Is Her ETF Only 50% in Stocks?

Stockton says the S&P 500 and Nasdaq 100 remain at new highs, but technology's concentrated leadership has left broad sector performance lagging and market breadth weaker. She says at least half of mega-cap stocks may need to be doing well for the S&P 500 to hold near its highs, while warning that weak breadth could signal either an oversold setup for broader participation or downside deterioration.

The 10-year Treasury yield has broken above its prior 4.75% high and reached 5%; Stockton identifies 5.25% as another resistance level and says the breakout supports higher yields over the next year, though any further rise may be stair-stepped. She says higher yields could be a headwind for some market segments, while the credit spreads she tracks have not issued an equity sell signal.

Small caps have recently underperformed large caps, and the Russell 2000 is below its daily cloud, which Stockton views as short-term resistance rather than proof that its cyclical uptrend has reversed. Still, she says downturns in the Russell's monthly indicators could make a return to new highs more difficult and could lead her to consider selling strength in small caps.

Stockton sees short-term semiconductor breakouts above 50-day moving averages and healthy near-term momentum, but says longer-term deterioration in monthly indicators is more concerning and the sector may not reach new highs relative to its June peak. She also notes that emerging-market proxies' relative strength partly reflects semiconductor exposure through Korea and Taiwan, where two stocks account for roughly 50%–60% of Korea's index.