It’s time for our weekly chart analysis with Jordan Kotick, Global Head of Technical Analysis of Barclays Capital.
Q – We saw a correction beginning of the month. Do you still remain bullish on stocks?
A – Yes.
We see not only sector leadership but markets in Europe for example that are throwing off longer term bullish signals.
Even short term, while the US stock market is trying to push to new highs for the year, European markets like the DAX and FTSE are already there. As you can see from the first chart, a massive base formed on the DAX (top chart) and it is outperforming the US broad market (bottom chart). This was the type of leadership that was in place before the credit crisis began.
Q – You commented recently on the bullish potential in Gold. Is this a move only for the yellow metal or is there something else one should watch?
A – While gold tends to drag many if not all the precious metals with it, silver is a standout. In fact, silver has been outperforming gold aggressively since the gold/silver ratio peaked in November 2008 as shown on the second chart. We believe it goes lower so given that silver is a high beta play for precious metals, if one is bullish gold, they might want to consider being bullish silver.
Q – Other commodities: You see an opportunity in Wheat?
A – Yes, Wheat. Like others in the agricultural area (corn for example), this chart is heavy and still falling. We think there are lower lows to come and given the bubbles that burst the last few years and are subsequently trying to recover, here is a market area where the downside is still in play.
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