US mkt to see volatility in Sept; risk of downside: Ross

As the market eyes the European Central Bank's meet on Thursday the US markets saw a rally. However, the weak manufacturing data from the US showed that all is not rosy, said Richard Ross, Global Technical Analyst at Auerbach Grayson.

"The ISM number and the construction spending was a slap in the face, its little dose of reality once again suggested it is not all rainbows as the recent rally and the market might have suggested that. So, a pretty tough start to the weekend and tough start to this final stretch of the year," said Ross.

As far as the ECB meet is concerned, Ross expects to hear the same talks of bond buying and trying to pull themselves out of their troubles.

Meanwhile, Ross is not very hopeful about the US market, "I expect some real hiked volatility in September and given how far we have come in such a short period of time, June-July and August. I think the big risk is to the downside," explained Ross.

Also read: Fed watching ECB just as closely as markets

Here is the edited transcript of the interview on CNBC-TV18.

Q: Did you spend your weekend focusing on the jobs data and what to expect on Friday or the ECB meeting on Thursday?

A: I am focused like a laser on all of these important economic data points that we have in front of us. In fact, we come right out of the gate, end of the summer holiday today and not just a long weekend here but the month of August turns into a summer holiday for the most part.

We had a nice drift up in the market here in the US and globally. We think that the holiday is over. Today’s ISM number and the construction spending was a slap in the face, its little dose of reality once again suggested its not all rainbows as the recent rally and the market might have suggested that. So, a pretty tough start to the weekend and tough start to this final stretch of the year.

Q: What are you expecting from both Thursday and Friday, are you expecting that the ECB will make some fairly firm commitments when it comes to bond buying at least from the short tenure bonds and are you expecting jobs data to be negative, positive combined with this manufacturing data? Will that give rise to hopes of further QE by the Fed, will that move the markets up, down? How will it work?

A: That was a pretty tough question there but let me tackle it one by one. Out of Europe, I think we are going to hear more of the same sort of rhetoric continue to support doing what they need to do, buying bonds, trying to pull themselves out of this morass. But, keeping in mind, the markets have come so far into what seems like a very key announcement.

I would be somewhat reluctant to be overly enthusiastic at these levels. We have had very strong moves in some of the troubled markets. Spain and Italy and also the DAX is up almost 18% on an year to date basis. You have to wonder at this point how much of any ECB bond buying is already built into prices at these levels.

Getting back to the US I think it is still a mixed bag. We haven’t really seen too much of job creation. You can't be overly optimistic. I think the market will certainly react overwhelmingly positive to any sort of job creation because we have had such a lack of any sort of job creation under president Obama.

I would also be concerned about that. Once again look at the reaction to the ISM and now we have these other data point potentially out there. I expect some real hiked volatility in September and given how far we have come in such a short period of time, June-July and August, I think the big risk is to the downside.