But stocks could drop as much as 28%, Citi analyst Tom Fitzpatrick tells King World News
In an interview with King World News
, Tom Fitzpatrick, one of Citibank's top technical analysts, said the stock markets will continue to move lower in the coming weeks, possibly tumbling by as much as 28 percent. This will come as the volatility index, or VIX, spikes.We've broken above that resistance level at 21% on the VIX, completing what is a very clear inverted head and shoulders within the daily chart. That suggests we could easily get a move that could take us up to something in the region of 27% to 28% (on the VIX).
The longer-term chart might even suggest a little bit more than that (27% to 28% target) on the VIX, but for the moment that is the interim target. So we are very closely focused on that and the fact that we've made a very significant break. By definition it suggest we're going to continue to see a lower move in the equity markets in the weeks ahead.
He expects the S&P to move down to the 200 day moving average if the VIX is going to move to the 27-28% target that he has set. This is a reiteration of a call he made just a week ago.
Additionally, Fitzpatrick expects new-all time highs in gold
.Gold went a little bit further to the downside than anticipated. We were looking for gold to hold the area just below $1,600. But really, despite the move lower, in the overall pattern it didn't really do any damage. ...
So, despite the bigger downdraft which we feel probably comes from a lot of short-term positions getting squeezed in a mini version of 2008, our belief is the setup here looks like a consolidation correction, not a reversal. We continue to retain our view that the next trending move in gold is going to be higher and ultimately to new all-time highs.
So, in Fitzpatrick's mind, equities will lag in the next few weeks while gold
should eventually rise higher than ever before.