Short-term Bearish, Long-term Bullish

Earlier this week, Katie Stockton appeared on CNBC's Squawk Box to share her thoughts on the current landscape of the market and what she sees over the short, and intermediate term.

Katie shares that her short-term indicators are "supportive of the pullback" and that she does not see a current bottom of 2800. Katie is actually eyeing the 2720 area, which she feels is more important. This level also coincides with a 0.382 Fibonacci retracement.

"The pullback is not accidental, that it started right around resistance at the September 2018 high. That's very natural to see some kind of pullback at resistance. So, I do view it as constructive, however, not really over from a short-term perspective. When looking at the momentum behind the market, it is weak still for the short-term. But intermediate-term, it hasn't really been affected yet."

Katie goes on to say that she still views this as a counter-trend in a bull market, stating that "The intermediate trend is still very much intact." She notes that we haven't seen many breakdowns in leading areas and are still only seeing breakdowns in names that have been lagging, such as Mattel ($MAT) or Gap ($GPS) and to her, this "isn't an issue for the broader market".

In regards to interest rates, and particularly the yield on 10-year Treasuries, she says that it's amazing how yields really mind these levels. Katie believes the next important area is 2.18. following the breakdown, we have seen recently.

Katie has a high degree of confidence that there is still more work to be done in equities. She mentions that in April, bullish sentiment was reaching very high levels. While that sentiment has come down, she is waiting for more of a "wash out". She is also waiting for momentum to improve. Further, Katie mentions the similarities between the current environment and mid-2016:

"If you remember, the market felt pretty terrible then, too, but if you look at it, there are some similarities in the indicators and that indeed preceded a breakout. So, I do think that eventually new highs are in-store for the S&P 500 and we keep that bullish bias as we watch the pullback mature."

According to the AAII Survey, one of the most followed in regards to market sentiment, there does indeed still seem to be some room to the downside in order to reach the levels of "bearishness" we saw in late 2018:

On top of this, hedging/protection is well above where it was in December:

Katie gives us a unique perspective on the current state of the market, particularly noting that we should be paying attention to the 2720 level, and not so much the 2800 level. She remains bearish over the short-term and is really looking for one last large move in regards to bearish sentiment from market participants. With all this being said, Katie is still longer-term bullish on the broad market and believes we will eventually reach new highs, mentioning the similarities between now and the summer of 2016.