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S&P Will Pull Back to This 'Reasonable' Level: Technician

Stocks concluded their worst week in three monthslast Friday—then bounced back Monday afternoon. Will the pullback continue—and is this a buying opportunity for investors? Katie Stockton, chief market technician at MKM partners, shared her insights.

“The pullback really looks like a counter-trend move to me—and a buying opportunity,” Stockton told CNBC. “Although what I want to see first is short-term oversold conditions to become more widespread.”

Stockton said 55 percent of the S&P 500 stocks were overbought last week, but the level has now come down to about 20 percent. She added that the pullback is “natural” and is likely to persist for several days at minimum.

“In terms of levels for the S&P 500, I’d say 1,160 might be a reasonable target for the pullback—that’s where the 50-day moving average lies—but in terms of sector rotation over the near-term, naturally we’ll see some more defensive rotation in areas like utilities.”

Longer-term, however, Stockton said she sees opportunities in the energy sector following the recent breakout in crude oil prices.

“I do think crude oil will pull back a little bit deeper and I’d take advantage of that as a buying opportunity,” she added.

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Scorecard—What She Said:

  • Stockton's Previous Appearance on CNBC (Nov. 11, 2010)

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Market Views—Across the Board:

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CNBC Data Pages:

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CNBC Slideshows:

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Monday's Top Dow Gainers (As of Noon):

Caterpillar

Home Depot

JPMorgan Chase

Bank of America

Travelers

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Disclosures:

No immediate information was available for Stockton or her firm.

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Disclaimer

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