Spain may weigh down global markets: Auerbach Grayson

Richard Ross, global technical analyst at Auerbach Grayson, believes the crisis in Spain could have an adverse impact on other global markets, which are currently not so downbeat as the beleaguered country.

“If we don’t get some sort of a crescendo low, some sort of key turning point, it is going to pull those other markets down,” he said in an exclusive interview to CNBC-TV18. Looking at the price action, Ross believes Spain is on its way to retest the 2009 lows. Below is an edited transcript of his interview. Also watch the accompanying video. Q: What do you make of the week that’s been, the strong earnings that we have seen that come in and the mix data that we have seen come in? A: What is interesting is we came in kind of limping into this week. We had a big pullback in the S&P 500, almost 4% from peak to trough, so you got people leaving at the end of last week. We broke below our 50 day moving average (DMA) for the first time since December of last year and when you get so many people on one side of the boat, it doesn’t take much positive news to get them back on the other side. That is what we have seen here, a nice little recovery in the S&P, back above our 50 DMA. As you have alluded to some strong corporate earnings out of bellwether stocks like Microsoft and McDonalds, so it is a strong finish on the heels of a disappointing week last week. Q: We have got all the concerns around Spain and they seem to be building to a crescendo. What do you make of the kind of impact that is going to have on markets across the world, and especially in the US? A: I think crescendo is a great word because when I look at the chart of the Spanish market and we take it back a few years, we see that we’re building towards a retest of that crescendo low that we had back in 2009. Of course back then that proved to be tremendous buying opportunities, not just in Spain but on a global basis. But now, we have markets in the US, Europe around the world at much higher levels here. So if we don’t get some sort of a crescendo low, some sort of key turning point, you are going to pull those other markets down. The US is up over 10% on a year-to-date (YTD) basis. We have been burnt before getting too pessimistic at key market bottoms, but the action in Spain is very uninspiring, down 18% on YTD basis. It’s down 12% just this month alone, and when you break down individual charts the comprised benchmark index it’s not any better. So from a purely price action standpoint, there is a reason to be particularly nervous here.