Trading patterns for currencies suggest stocks could be headed lower, this strategist says.
Sure, you can trade currencies as an alternative to stocks. But what about looking at currencies for clues to stocks' direction?
Over the week ended May 25, he says, the S&P 500 stock index moved higher, but risk currencies weakened. "Two times out of three, that's unsustainable," he told CNBC's Melissa Lee. "The S&P can't charge ahead without confirmation from risk FX."
Looking back longer term, Gordon says, other stock markets have also been pushing lower. "The S&P is kind of going it alone."
Gordon thinks that stock move is unsustainable, and he has a currency play. Noting that the euro had been holding above 1.29 against the Australian dollar. But that level, has been breached, which Gordon says means that euro selling will outpace any buying of the Australian dollar. So, he says, "if you want to play an S&P selloff, you want to go to the weaker currency. That means go to euro-dollar. It sounds obvious, but now, with evidence from euro-Aussie, euro-dollar is the weakest trade."
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