No space for bears; mkt may revisit old highs: Richard Ross

In an interview to CNBC-TV18, Richard Ross of Auerbach Grayson says that equity markets will move higher in June, mainly because bulls are reasserting their presence in the market.

“Based upon recent price action, we are up 6% in the S&P just over the last two weeks and up 3% on a month to date basis. I think it’s very bullish action and I think we could revisit the old highs,” he said. Even though newsflow may not be all positive, the market has been a difficult for bears to sell into. Regardless of the news, the market has always strengthened and made its way higher. “We think the news flow is going to improve and prices should continue to improve as well throughout the month of June,” said Ross. He is positive when it comes to Europe as well. He says that there are signs of progress in the eurozone, helping turn things around. “The internals are healing, the technicals are steadily improving and we are far more encouraged in the market than we have been in quite some time,” he said. Below is an edited transcript of his interview with Menaka Doshi. Also watch the accompanying video. Q: Are you disappointed because the markets seem to be holding its breath for another round of easing? A: I am actually not disappointed at all. I think this initial kneejerk reaction down is to be expected. I think there was an outside chance of full on quantitative easing (QE), but I don’t have a problem that we didn’t get that today. I think the markets are actually in a very strong position and I like the reaction. As I said, kneejerk down but now we have come back, we are well off of our lows, we are almost unchanged on the day. I think we finish the day considerably higher here. Q: Are you holding your breath for an announcement in the next policy meet in July, because that’s what these markets have been doing? They come to terms with the fact that there is no further easing right after one FOMC meeting, only to run up with expectations before the next FOMC meeting. Are markets now waiting to see more data to show slowing signs in the US before they hope for another round of QE? A: I think that you made a great point and I think to a certain degree thing are being pushed further down the road, but I don’t think that’s a bad thing necessarily. I think the markets are starting to discount all of these Fed meetings and I think we make more of it than it really is. I think price discounts everything and the price action right now is telling you that markets want to go higher regardless of what we see out of the Federal Reserve. So based upon recent price action we are up 6% in the S&P here just over the last two weeks, we are up 3% on a month to date basis. I think it’s very bullish action and I think we could revisit the old highs, regardless of what we see out of the Fed. Q: We started the week on relatively good news coming in from Greece, because the election outcome was the best that we could have had. We end the week on a series of important meetings in the European Union. What do you make of what this week has meant for Europe? A: Certainly no rest for the weary and it keeps people like you and me particularly busy. But I think clearly we have seen signs of progress and the markets are responding to that progress. Slowly but surely we are turning this ship around and we are getting it going in the right direction. I know the pace is somewhat slow, but I am very encouraged. All of the data points that we are seeing this week are somewhat positive. We are making progress not just on a macro front, not just on the headline front, but in terms of the market itself. The internals are healing, the technicals are steadily improving and we are far more encouraged in the market than we have been in quite some time. Q: You see this strength continue through June because I know in our previous conversations you have said June would be dramatically different from what May threw up for the US markets? A: Yes we do see a continuation of this strength. Look how difficult it’s been to sell this market. Every time the bears try to step in and reclaim control the bulls are reassuring themselves despite the fact that we have had these strong gains throughout the month of June. So I think you are pushing a string here if you are selling this market. Volumes have been particularly light, there is a lot of cash on the sidelines, a lot of people sitting this move out as we continue to grind higher. But you are not going to be able to sit on the sidelines for much longer if you want to keep up with your benchmark. So we think the news flow is going to improve and prices should continue to improve as well throughout the month of June. Q: How do you feel about India, China, Brazil and the rest of the emerging markets? A: Look at the price action in India. Earlier this week we had the RBI, they didn’t cut rates as people had hoped for, still worrying a little bit more about inflation and a little less about global growth slowing. Yet we had a little kneejerk down, a 1% move in the Nifty and we brought prices right back, we have largely made up those losses. So in technical analysis we focus on the reaction to the news, not the news necessarily itself, even though I follow that as well. But what we are seeing is a very bullish reaction to the news here. So I like what I am seeing out of India. We are seeing a better relative strength in Brazil, better relative strength in Russia, but I like what I am seeing across the EMs. Look those markets let us down in March and they bottomed earlier and they should lead us out coming on the way back up.