Jordan Kotick: Talking Technicals
Chart expert, Jordan Kotick, Global Head of Technical Analysis at Barclays Capital back from a trip in Europe.
Here's this week's Q&A
Q - You just got back from Europe.
Besides the ongoing headlines about European contagion, what else is at the forefront of the European markets?
A - The aggressive weakness in the Euro is clearly an area of focus. While many throughout the world focus on how the Euro is falling against the Dollar, how it is falling against other currencies (Australia for example) is very much a concern. With the exception of the British Pound, the Euro is falling against other European and Asian markets even more so than it is against the US Dollar. We do not think this move is complete.
Q - What about gold, hitting new highs?
A - Gold. It has broken out to all time new highs when measured in Euro or GBP terms. While this reflects the weakness of the underlying currency, it is also reflective of the overall trend for Gold generally since it is more than just a proxy for Foreign Exchange
Q - You have been a long term Gold bull but Gold in Dollar terms is not doing as well. What does this mean to your view?
A - It is supportive. The overall trend in Gold is still higher, depending on the currency fluctuations, gold in different currencies will lead at different times. But we expect the general pull of stronger gold to eventually take it higher in US Dollar terms as well
Q - Is there anything you are watching specifically given the employment numbers today?
A - Bonds, specifically 2 year yields. Last year they aggressively spiked higher after better than expected employment numbers but the move was faded. If 2s can breakout to the topside and hold the move, it would likely signal the market is more aggressively pricing in a recovery. For now the charts are choppy and have yet to tip their hand.
Q - We have to end with a quick word on stocks. They have done much better lately. You are bullish stocks this year but called for this Q1 correction. What would tell you the correction is over?
A - As always, sectors are key. The broad market has been range bound just as Financials both outright and relative have been range bound. When Financials break out of their range to the topside it will start to the tip the balances towards the correction being over and the upside coming back into play. They are very close, this is likely to be a bullish story for Q2.
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