Investors looking past govt shutdown, default: Richard Ross

Investors in the US are for the most part willing to look past fears of a government shutdown and debt default, S&P 500 is holding nicely around the 50-day moving average, says Richard Ross, global technical analyst at Auerbach Grayson.

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Though he is conservative in his approach on the back of speculative excess in technology stocks and some key divergences in price and momentum that investors are overlooking.
According to him, US will not default, and neither will the shutdown last for too long. He tells investors to respect that risk, but not fear it. Below is the verbatim transcript of Richard Ross' interview on CNBC-TV18 Q: It has been an interesting week for the US with the fourth day of government shutdown. We just spoke to John Harwood of CNBC a short while ago. He said there is no hope of any conciliation over the weekend, more likely that we will get very close to that debt ceiling deadline of October 17 before the shutdown is lifted. What do you make of the politics going on in Washington DC?
A: My specialty is prices not politics and right now those prices are telling you that investors are for the most part willing to look past fears of government shutdown and the debt default, we are holding in rather nicely in the S&P 500 around that 50-day moving average. You alluded to the big round number in the Dow Industrials at 15000, still hovering around 1700 in the S&P which is just a hair of an all time high.
I had been some what bullish this summer as markets were pulling back around the world, I said we have a nice rally into the fall, but here we are in the month of October which has a very sinister reputation for major market declines here in the US and we are seeing some speculative excess in technology stocks and we are seeing some key divergences between price and momentum that investors are really overlooking, so, I am some what conservative here and my views are nothing to do with the politics. Q: How can you ignore the politics? Would you not ascribe the weakness that we saw in the last two trading sessions to some degree of disappointment with what is going on in Washington DC especially as we get closer to that October 17 deadline?
A: You can't ignore it but on the same token to try to figure out exactly what is going on in Washington is probably more difficult than trying to figure out what is going on in the stock market. I think it is just a convenient excuse.
Once again we have markets here at the tail end of a four year plus bull markets here in the US and as I alluded to we are seeing some of those key signs of exhaustion and speculation and the problems in Washington could just be a fundamental catalyst for technically-driven pullback. We haven’t had a high single digit pullback all year. We haven’t even touched the 200 day moving average this year which is most unusual. We are hugging this well-defined trend line but the highs that we are making in the market are coming in at lower levels.
Once again to your point the politics out of Washington could create that fundamental catalyst for a little steeper pullback here than many people are expecting. I am just saying don’t be complacent here, don’t think that every thing is just going to work out in Washington, they would never push us into default, they are not going to keep the shutdown going for too long, respect that risk but perhaps don’t fear the risk.