Mark Newton: “A Choppy, Volatile Year Ahead”

Episode Overview

• This episode features technical analyst Mark Newton discussing a specific roadmap for financial markets in 2026, predicting a shift from easy gains to a more volatile environment.
• The conversation focuses on market cycles, warning of a potential 15-20% correction starting in early 2026 that will act as a "pause that refreshes" rather than a secular crash.
• Newton explains why the "easy money" in big tech is likely over and details a major rotation into commodities, precious metals, and emerging markets driven by a weakening US Dollar.
• It offers practical advice for managing risk during "parabolic" moves in asset prices and identifying the right technical signals to exit trades safely.

Key Concepts

• Time Cycles vs. Random Price Action Markets are not random but often follow predictable time-based rhythms. Newton references a 41-month cycle suggesting that investors should focus on "where we are in the timeline" rather than just reacting to daily news. This framework currently predicts a market peak in early 2026 followed by a decline into October, setting up a buying opportunity for a subsequent rally into 2028.

• The "Pause that Refreshes" It is crucial to distinguish between a secular bear market (long-term wealth destruction) and a cyclical correction. The predicted 15-20% decline in 2026 is framed as a healthy consolidation. Understanding this distinction prevents panic selling; instead, investors can view the volatility as a necessary reset that allows the long-term bull market to continue.

• Market Breadth and Sector Rotation Market indices like the S&P 500 can be deceptive because they are heavily weighted toward a few large tech companies. As the market rotates, the headline index might drop while individual stocks in "boring" sectors (Industrials, Energy, Financials) actually rise. This concept explains why holding a concentrated tech portfolio is risky during a "changing of the guard" phase.

• The Capital Cycle in Commodities The economic principle that "low prices cure low prices" drives commodity booms. When prices for assets like oil remain low for years, producers stop investing in new supply. Eventually, steady demand meets this restricted supply, forcing prices to spike. This cycle suggests the energy sector is attractive after a three-year bear market, contrasting with overextended tech stocks.

• Managing Parabolic "Blow-Off" Tops When asset classes (like silver or AI stocks) go vertical, they enter a mania phase. Trying to guess the exact top is dangerous. Instead of selling into strength, investors should wait for a confirmed technical breakdown—specifically, a violation of market structure—to capture the majority of the upside without getting caught in the inevitable reversal.

• Dollar Devaluation as a Macro Driver Technical patterns indicate a significant devaluation of the US Dollar is underway. Since commodities and emerging market equities are priced in dollars, a weaker dollar acts as a massive tailwind for these assets. This inverse correlation is the primary thesis behind shifting allocation toward hard assets like gold and silver.

Quotes

• At 3:08 - "I'm actually expecting potentially a 15 to 20% decline, which starts in late February, early March, takes us down into May or June... and then we have a third quarter correction that largely marks the end of this consolidation." - Outlining the specific roadmap for 2026 volatility so investors can manage expectations.

• At 9:37 - "Imagine you have a basketball team made up of five 90-pound weaklings and LeBron James... That team still may be able to win a lot of basketball games because of how dominant LeBron is... but it's not a very healthy bench." - Using an analogy to explain why the stock market can look strong on the surface while the average stock is actually weak.

• At 11:47 - "For me as a longer-term trend following technician, trends matter more than anything. And attempts to try to sell markets when they're in uptrends generally does not work out." - Warning against "top-ticking" or betting against the market momentum until there is a clear trend reversal.

• At 15:19 - "There have been several times in history when we've had multiple years of rising prices, and that doesn't mean you just rush in and sell stocks because we've been up three years in a row. You have to always look for the warning signs." - Countering the gambler's fallacy; time alone doesn't cause crashes, technical evidence does.

• At 22:18 - "The problem... that investors made in recent years is really being too overweight technology... before long you look at your portfolio and it's about 80% technology." - Explaining "accidental concentration" risk, where market growth distorts a diversified portfolio into a high-risk tech bet.

• At 26:39 - "Anything that's moving parabolically, when you see your first sell-off, that doesn't mean the peak's in... it takes usually a number of different attempts at hitting highs before you roll over." - Clarifying market mechanics to help investors avoid panic-selling the first dip during a bull run.

• At 32:12 - "Watch when silver or gold starts to make a new multi-week low... Or if you want to be short-term, wait for it to make a new say three-day low... on a closing basis." - Providing a concrete, actionable rule for identifying exactly when to exit a winning trade.

• At 41:53 - "The cure for low prices is low prices... people just stop exploring and developing because it's not profitable to do so, and then supply gets tight as a result... and that shoots prices up." - Summarizing the fundamental economic cycle that makes the energy sector an attractive value play.

Takeaways

• Use the "Trend Break" Rule for Exits Stop guessing when to sell. Establish a rigid rule: for short-term trades, exit only when an asset makes a new 3-day closing low. For longer-term positions, wait for a new 3-week closing low. This prevents you from exiting too early during volatile uptrends.

• Rebalance Your "Accidental" Tech Exposure Review your portfolio composition immediately. If market gains have pushed your tech allocation to 70-80% (even if you bought a broad index fund), you are highly vulnerable to the predicted 2026 rotation. Actively pare back tech to buy undervalued sectors.

• Pivot to Real Assets and Value Shift your defensive strategy. In 2026, "safety" likely means owning Commodities (Gold/Silver), Energy (Oil & Gas), and Consumer Staples rather than holding Cash or Treasuries, as these sectors benefit from the falling dollar and inflation.

• Prepare Cash for Q4 2026 Treat the predicted correction (Feb-Oct 2026) as a tactical opportunity. Do not leave the market permanently; instead, preserve capital during the mid-year dip to aggressively buy the lows in October/November for the next leg of the bull market into 2028.

• Look Abroad for Growth Diversify geographically. Emerging Markets have underperformed the US for a decade but are technically breaking out. Use the weakening US Dollar as a signal to increase exposure to international equities which act as a hedge against US stagnation.