Our weekly look at charts with Jordan Kotick, Global Head of Technical Analysis at Barclays Capital.
Q: How does 2010 look to you?
A: We believe risk will do ok this year but it will be more challenging than 2009.
We do not expect equity returns to be as strong as they were last year with gains likely punctuated with steeper and more protracted declines. Don't forget we are going into the 2nd year of the Presidential cycle.
The odds of a positive return in Year 2 are lower than they are in the other 3 years of the 4 year cycle.
Q: What are some of the likely catalysts to watch out for if stocks are going to have a bumpier ride?
A: There are many but we are keeping a close eye on Rates.
We believe the markets are evolving from credit-centrism the last few years, to equity-centricism last year to rates-centrism this year and perhaps next. The risk is a bearish turn for bonds in 2010 that will trickle through all the asset classes. While stocks will pay attention, so to will FX. Interest rate differentials may start to matter again and of course, higher yields would be bearish for JPY which has been very tightly correlated with US rates for the last few years
Q: One of your boldest calls last year was aggressively bullish Gold. Do you still feel that way?
A: Yes, we do not think the Gold bull market is over.
The caveat is that it may chop and correct for a quarter or two before it ignites again. But what we also liked last year and still aggressively like is Platinum. This precious metal outperformed Gold last year and we think it will again.
The ratio, on both the monthly and daily timeframes suggests Platinum over Gold (ratio lower) and we want to keep this one on the radar for 2010