Need clarity from Europe; get your contrarian hat on: Ross

Europe continues to steer global markets, says Richard Ross, global technical analyst at Auerbach Grayson. In an interview to CNBC-TV18, he says that a little clarity or positive newsflow would go along way into pushing global markets higher. Until then, we have to live with the euro also going lower, breaking the 1.25 barrier yesterday.

“We think we are still set-up for a move higher and are fairly bullish here. So, it’s a contrarian bullish call right now,” he adds. Below is an edited transcript of his interview. Watch the accompanying video for more. Q: How was your long weekend? Did you mull over a Greek exit, worry about Spain or fret over a slowing China?
A: We actually had a wonderful weekend here and I promise you I didn’t think about Spain, or Greece or Europe, or anything market related. Q: Not, Facebook?
A: Yes, not even Facebook. I am 40 years old, my friends know where to find me, I don’t need Facebook. We are back in the saddle here and the song remains the same. We are starting off on a fairly positive note here but of course Europe continues to steer this ship. Markets were acting particularly well right up until that close in Europe around 11-11.30 in the morning and then we see the euro fall off a cliff here, breaking below that key psychological level at 1.25.
All this consumer confidence, housing prices - this is just a distraction. If we have got a little clarity out of Europe, a little traction out of the situation over there, all that confidence would come back into the market and people wouldn’t care about housing prices and we would just take things higher. In fact, we think we are still set up for a move higher and this is just part of the base building process here. We still are fairly bullish here and it’s a contrarian bullish call right now. Q: Are you expecting for that move higher irrespective of how the Greece second election turns out to be later next month?
A: It can always be worse than the worst case scenario but we think a lot of this is priced into the market at these levels. We have already seen bear market declines from the peak to the trot in emerging markets like Brazil, Russia and China. We have seen the euro come down here to levels we haven’t seen since last year. We think a lot of this is priced into the market.
Reading the Financial Times everyday and trading based upon the headlines is typically not a way to make money. I read it this morning the whole thing read like an obituary. So from that standpoint, it’s time to be a contrarian. We are seeing signs of a turn here and so many people leaning on one side of the boat now if you blink you are going to miss it. You have to see through the headlines and stare at those prices and you have to put your contrarian hat-on right now. Q: Are you saying this market has factored in a Greek exit potentially?
A: I don’t know that anyone knows how to factor that in but it is so widely publicized at this point that people are prepared to a certain degree. As I said it can always be worse than even our worst expectations but I think there is a sort of bet-upon something that has maybe a 2% chance of happening without trying to overly quantify things.
Betting on the end of world has not been a great strategy over time, it never happens when people get on one side of the boat and we expect things to just implode and it just hasn’t really happened in the 20-30 years that I have been doing this. So typically when things look like this, they come back in the other direction with an equal vigour and I think that is what is going to unfold here as well. Q: I am not on Facebook either but I have been watching that stock today, it cracked below the USD 30 mark, what is going on with that?
A: I was on the parent network of CNBC just on Friday; I came out with the USD 22 price target on the stock. I think the stock is overhyped, it is over-owned and it is oversupplied and it is that oversupply which is the key factor. This is what I would call a classic long squeeze.
There is no one left to buy this stock. Everyone that was going to buy Facebook, whether institutional or retail, they already own the stock. The cat is out of the bag, the deal fell flat and there is so much supply out there, the size of the deal, the poor appetite for the stock in the offering, it all spells doom in the short-term. Great brand on the internet but poor IPO and poor publicly traded stock.