MW This strategist warned of a selloff in December. He's watching these two signals to confirm if stocks have bottomed.

By Barbara Kollmeyer

3Fourteen's Warren Pies sees depressed sentiment, but technicals aren't there yet

Among those who saw trouble brewing for stocks last year was strategist Warren Pies, who warned clients in December that the S&P 500 faced a 10% correction in the first half of 2025.

"We saw weakening in the economic data, and we saw a Fed that was going to be hesitant to cut rates because of these policies out of the White House," the founder and portfolio manager at 3Fourteen Research told MarketWatch in a Wednesday interview. He also expected turbulence from the transition into the Trump administration, which he sees playing out through tariffs.

The S&P 500 SPX has dropped 9% this year and is down 13% from its February highs, meaning Pies called it correctly. He downgraded U.S. stocks in February from overweight to a benchmark weight as he saw investors as still too bullish and not fully understanding tariff or economic troubles to come.

In our call of the day, Pies said S&P 500 is "getting close to the lows," but before he moves back to an overweight and starts buying again, he needs confirmation from two big signals.

One of those bottoming signals - depressed sentiment - he said has been confirmed, citing increased volume in inverse ETFs, which are bets that the S&P 500 will fall.

He's still waiting for confirmation on a second more technical signal. He said that could show up through a so-called breadth thrust - showing 90% of S&P 500 stocks above their 10-day moving average. Breadth is the number of advancing versus declining stocks and a technical indicator and used to help confirm if stocks are in an uptrend or downtrend.

Or confirmation could come through a retest of the market's 52-week low of 4,982 in April, he said. Of 18 previous bear markets dating back to 1950, 13 had a double bottom kind of pattern, meaning the market low had a retest, he said, adding that that low must hold and stocks need to rally off of it.

Pies, who also manages the SMI 3Fourteen Full-Cycle Trend ETF FCTE and SMI 3Fourteen REAL Asset Allocation ETF RAA, said he's generally bullish looking out a year from now, but for now is overweight bonds, and underweight commodities. He won't de-risk stocks further unless the economy really takes a dive. "We've been telling our clients to stay offensive, to keep an offensive mindset, and look for the bottom signal that we've laid out, and then we would be increasing equity exposure," he said.

Among past calls 3Fourteen has gotten right, he said they've been bullish on gold since 2023, predicting $2,500/ounce by early 2024 and in December called for $3,000/ounce. A former energy strategist at Ned Davis, he also saw oil (CL00) headed below $60/barrel, which it briefly hit earlier this month.

What else is Pies thinking? The economy is softening and can't support 7% mortgage rates, and the phenomenon of longer-term rates rising faster than short-term ones will flatten as the former start to drop.

Pies also weighed in on the American exceptionalism theme in a recent letter to clients. He discussed how foreign flows are vital to U.S. stocks - he estimates they own 20% - as U.S. households are massively overweight with little scope to buy more, and pension funds are also fully loaded. But he's not worried, like some.

"I think the U.S. is still the cleanest dirty shirt and I don't think there's going to be an unwind, ultimately of these structural flows from foreign investors into U.S. markets," he said.

Read: It's hedge funds, not foreign investors, that have been dumping stocks, says JPMorgan

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are pointing to a lower open, Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y are slipping, the dollar DXY is off 0.5% and gold (GC00) is up 1.4%.

   Key asset performance                                                Last       5d      1m       YTD      1y 
   S&P 500                                                              5375.86    1.90%   -5.89%   -8.60%   6.00% 
   Nasdaq Composite                                                     16,708.05  2.46%   -6.65%   -13.48%  6.33% 
   10-year Treasury                                                     4.363      3.30    -0.30    -21.30   -34.50 
   Gold                                                                 3343       0.05%   8.92%    26.66%   42.58% 
   Oil                                                                  62.34      -2.21%  -10.83%  -13.26%  -25.58% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

A Chinese spokesperson at a press conference said there are "absolutely no negotiations on the economy and trade" between the U.S. and China.

A day after Elon Musk vowed to spend more time running Tesla $(TSLA)$ and less running DOGE, the White House was pushing back and saying he has more work to do.

Southwest Airlines $(LUV)$ became the latest airline to withdraw earnings guidance.

Chipotle $(CMG)$ is falling after the burrito chain reported a sales fall and tweaked its guidance lower, citing a spending slowdown.

IBM $(IBM)$ is down after the tech giant stuck to its full-year outlook for cash flow and some of its sales, but warned customers could get skittish.

Results from Alphabet $(GOOGL)$ (read preview) and Intel $(INTC)$ will be the highlights after the close.

Weekly jobless claims and durable-goods orders are both scheduled for 8:30 a.m., followed by existing home sales at 10 a.m.

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Top tickers

These were the most active tickers on MarketWatch as of 6 a.m.:

   Ticker  Security names 
   TSLA    Tesla 
   NVDA    Nvidia 
   GME     GameStop 
   PLTR    Palantir Technologies 
   AAPL    Apple 
   AMZN    Amazon 
   TSM     Taiwan Semiconductor Manufacturing 
   NIO     NIO 
   AMD     Advanced Micro Devices 
   META    Meta 

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-Barbara Kollmeyer

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April 24, 2025 06:58 ET (10:58 GMT)

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