Market Psychology With Chart Expert
Our weekly regular on the Closing Bell is Jordan Kotick head of global technical strategy for Barclays Capital.
Q – Last week on the show, you mentioned that you were not overly concerned about the degree the markets have rallied this year.
A – The equities markets have climbed aggressively this year but keeping it in perspective, most global equity indices are still well below where they were one year ago and substantially below their all time highs. So overall, the gains this year speak to an extended move perhaps short term but bigger picture, the market still has a lot of work to do.
Q – While many bullish signals are being generated in various markets, what is the next market you are watching?
A – The Dow Complex (Industrials and Transportation) are important, especially when they move in unison as they are bullishly doing currently.
Often overlooked but equally important is the Dow Jones Utilities Average.
It tends to lead in bear trend, lag in bull trends but you do want to see it participate.
As shown on the next chart, it is lagging but approaching a breakout level of its own from a range that has lasted over a year. Gains north of approximately 400 would be a positive sign
Q – Anything else on the radar?
A – As always, market psychology is readily sign through the asset classes, FX in particular. As shown below, USD/TRL is a market that checks all the boxes: it is a carry trade, a “risk on” trade and an Emerging Market. USD/BRL is leading, as it typically does, to the downside. Further decline (with big levels approaching) in USD/TRL would be another sign of confidence that the market was edging back towards embracing riskier assets.