BarCap Charts Tale For 2010

asiablues's picture

By Economic Forecasts & Opinions

In a CNBC interview on December 31, 2009 (video below), Jordan Kotick at Barclays Capital shared technical charts tale of some possible market corrections in Q1 or Q2 of 2010.

Bovespa (BVSP): Index, currently at an almost all time new high, is signaling a possible correction coming when traders start to fade this market.  But overall trend is still upward positive.  Brazil, Mexico and Chile are the three crucial ones to watch in the emerging markets.    

My Take:  Brazil has outperformed all three other BRIC stock markets since November 2001, based on MSCI country indexes. Brazilian stocks have posted hefty gains of about 83% for 2009 after plunging 41.2% in 2008. The foreign investment capital pouring into the country has also helped the Brazilian currency, the real, strengthen 34% against the greenback last year. In addition, Brazil just snagged a coveted third investment-grade rating last September from Moody's.

So, from all indications, it seems any Bovespa (BVSP) technical correction should just be another starting point for more new highs. (See my analysis on Brazil here.)  Resource rich Chile is also looking red hot as the global leading copper producer.  However, Mexico is facing some headwind with the Fitch and Standard & Poor's credit downgrade on fiscal concerns stemming from the country’s falling oil output and anemic growth prospects. 

Technology - Tech stocks were the big winners in 2009, but Nasdaq Advance/Decline chart shows the breadth is starting to roll to the downside.

My Take: Among the 10 major industry sectors in the S&P 500 index, tech stocks lead all sectors and have rallied 59% in 2009, even ahead of the base metals sector.  It appears tech already has a lot of built-in froth considering it is "non-tangible", and lacks the powerful fundamental support, for example, from China, that the base metals sector has. From that perspective, Mr. Market seems to have priced in a substantial and lasting economic rebound with very little margin of safety.

Banking - Bank stocks are the epicenter of the market; however, based on the Relative Value chart, bank stocks are looking vulnerable right now, which could lead to a broader market downturn.      

My Take:  As discussed in my earlier article, commercial and commercial real estate loans are still deteriorating at a rapid rate. And despite promising early indicators, consumer loan losses continue to climb. Furthermore, let's not forget there still could be a sovereign default or two in 2010. These highly probable events, just to name a few, once unraveled, are bound to take a few more banks down with them.  (See my quick take on Fannie, Freddie and Citi here)

Last But Not Least...

Technology (Motorola, Palm, SunMicro Systems) and financial (Fannie, Freddie, Ambac, E*Trade) also account for 70% of the "10 Brands That Will Disappear in 2010" list based on analysis by 24/7 Wall St.  Fundamental analysis typically has very little bearing on the market until after a big crash; nevertheless, one should take notice when both fundamental and technical are sending out similar warning signals.  (On a side note, some of the 10-to-disapear acts might be worth investor's consideration as they could be potential M&A targets.)

With global recovery still on shaky ground, corrections, fundamental or technical, from three market sectors, occurring in the first half of the year, as foretold by BarCap charts, could easily dip us right into a W faster than you can say recovery. 

Quote of the Segment: 

 "Direction comes from America, leadership comes from abroad."


Video Source:  CNBC

 Economic Forecasts & Opinions

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Anonymous's picture

Motorola going belly-up?! It just couldn't happen to nicer people. Let's speed things up by boycotting them:

Grand Supercycle's picture


I also use technical analysis and more analysts should study share price trends in my opinion.

Technical analysis can assist us as to the direction of the economy as it is a leading indicator.

In early 2007 I warned of an impending stockmarket crash.

I confirmed a bottom by April 2009.

In mid 2009 I warned of an impending USD rally.

The uptrend since March 2009 has been a bear market rally contained within a much larger bear cycle that started in 2000.

Anonymous's picture

Uhhh.. Thnx for that. Cannot fathom why natty is going down. Freakin winter is just starting.. Should be heading to 12.. I guess the ppt overlooks that one... Lol. Thnx robo..

You may include a girlie shot. I don't mind.


RobotTrader's picture

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Careless Whisper's picture

Seems like Kotick kept staring at the tits on tits. Anyway... technology stocks have been trading sideways and to the upside. Maybe they will break up or down; we need to wait and see. It makes no sense to counter that analysis with some type of fundamental analysis about China. This market makes no sense whatsoever. You got to find the trends/breakouts and go with it.

deadhead's picture

look at the BKX charts...clearly they have rolled over from mid Oct.

Anonymous's picture

On the bright side, its great to be shorting the market from such lofty heights and selling near another generational S&P500 peak (1115) when market opens Monday morning and not worry about filing the tax on those returns for almost a year. I would be happy to see the S&P go even higher in Jan/Feb for the eventual downtrend that will HAVE to arise to take care of the March 2010 debt bomb !!

Anonymous's picture

"....leadership comes from abroad."

Ok, so what's her name?