CNBC Stock Blog

Banks, Energy Stocks to Bounce: Market Technician

The major indicies are on track for their best annual performance since 2003. Where should investors put their money to work in 2010? Katie Stockton, chief market technician at MKM Partners, shared her insight.

Getting Technical

“2009 was a very impressive rally for the major indicies and we'll see higher prices in 2010 as well, although I don’t believe the rally will be quite as steep,” Stockton told CNBC.

“Positive momentum backs the market and I like how the major indicies pushed to new recovery highs recently out of short-term consolidation phases, even as the negatively correlated dollar saw a pretty impressive oversold bounce.”

Stockton said the inverse relationship between the weak dollar and strong stocks is decoupling.

“The inverse relationship is really bound to decouple, based on the number of people expecting it to continue,” she said.

Meanwhile, Stockton said the sectors that will perform well next year will continue to be the cyclicals.

“The technology, industrials, and consumer discretionary [sectors]—you still see those sectors outperform as the market extends its rally."

"But I expect the more oversold sectors, on a relative strength basis, to see a bounce on a relative basis in the New Year. And that would be financials and energy."

However, Stockton warned the defensive sectors such as the utilities, health care and some consumer staple areas have been oversold and are poised to roll over.

  • Watch Stockton's Previous CNBC Appearance (Sept. 1, 2009)

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No immediate information was available for Stockton or her firm.