Carter Worth

SUSIE GHARIB: Let's get another forecast on the markets from a technical analyst. Joining us right now, Carter Worth. He's chief market technician at Oppenheimer and Company. Hi Carter.

CARTER WORTH, CHIEF MARKET TECHNICIAN, OPPENHEIMER: Hi Susie.

GHARIB: Well, as you look at your indicators, do you think that what we're going through now is a normal market correction or the beginning of a bear market?

WORTH: Sure, there's a pretty time-tested rule that one can rely on for determining bear or bull -- a 200-year old rule and it is the character of slope of the (INAUDIBLE) mechanism, the 150-day moving average. So currency, commodity, index, stock, what have you, if the (INAUDIBLE) mechanism is rising, the instrument in question is bullish. If it's declining, the instrument in question is bearish. What's happened now for the first time in over a year, the smoothing mechanism on the S&P 500 is now no longer rising and just as of two sessions ago has turned down. And it's turned down in China, months ago. It's turned down in most of the European borses (ph) from Paris to Italy, to Spain months ago. So one of the last holdouts is the U.S. and the issue is not so much whether it's an opinion of bull or bear, it's the primary trend has now changed to no longer rising.

GHARIB: And how do you see the trend going through the rest of this year, for the Dow and for the S&P?

WORTH: Sure. We spend a lot of time trying to pay attention to symmetry and there are rules of symmetry if you will, borrow from some of the rules of physics. And in the S&P, what's happening so far, basically, we came in this morning, we were unchanged on the year. And there is a tendency where if you have a violent up year right after a big bear market, meaning you go down hard in a big bear and the first year that's up is up big, we had that in '09 -- the second year is often at the end a push, nothing's happened. And this happened after the 2000 NASDAQ bubble crashed when we dropped from 2000 to 2002, the first up year '03 was up big (INAUDIBLE).

GHARIB: So how do you see your -- specifically your prediction for the Dow and the S&P by the end of this year? Are they going to be unchanged or are they going to go higher or lower?

WORTH: (INAUDIBLE) unchanged and we're mirroring '04 almost exactly. Strong in the beginning of the year, January as we were in '04, weak now and we were weak in '04. And then we had strength at the end of the year in '04. We're looking for that same pattern to repeat. At the end --

GHARIB: What is the likelihood that the Dow could turn back statistically into the 11,000 territory or the S&P could get back up to the 1200 level?

WORTH: Right. We think that the highs are in for the year, so the late April highs of 12, 19 change on the S&P and 11,200 or thereabouts on the Dow, we think that marks the high. We think the lows are about 2 percent from here. And then we end up again on the year what you call (INAUDIBLE) plus or minus 2 percent.

GHARIB: You told me that despite this, you know, flat performance or downward performance of the S&P this year, there still are some stocks that are worth buying and you gave me a couple of names. And let's take a look at them. Heinz (HNZ), Campbell's Soup (CPB) and General Mills (GIS). They're all up so far in 2010. What does the technicals tell you and is it a good idea to buy these stocks now?

WORTH: Sure. Well they have one -- let's say two common characteristics. They are all defensive by nature, right -- ketchup, canned soup, corn flakes, General Mills. So the issue they're still in primary trends that are rising. And as you point out, they're up on the year. And it's of all the things that have ever been tested in all markets at the highest level of the biggest machines ever, computer, relative strength is the number one thing. How is something doing, a stock, compared to its asset class other stocks? These stocks are outperforming. They're exhibiting impressive relative strength.

GHARIB: Let's look at the opposite way because you said there are so many stocks that are not exhibiting any strength. You gave up three names -- Google (GOOG), Goldman Sachs (GS) and Freeport (FCX), all of them down double digits. What's your analysis there?

WORTH: And here it's really, it's the quota, yes, or quite the opposite. In each case and they're totally different businesses, a media company -- Google, a broker dealer, Goldman, a copper company, Freeport, but the patterns are identical. Each was very strong. Each has been faltering. And now the smoothing mechanism (INAUDIBLE) has turned down in each one.

GHARIB: What about market volatility, Carter? We hear a lot about this, the market volatility, the so-called Vix index has really spiked up in the past week even. Do you see between now and the end of the year a lot more volatility or not?

WORTH: I think the volatility -- elevated volatility will persist and that happens in transition periods, right. If you're in a steady down trend, volatility abates. If you're in a steady uptrend (INAUDIBLE). When you're in a transition period, there's a debate raging and that's what's (INAUDIBLE) and those who think the market is cheap and those who think it's got problems. The Vix or volatility typically spikes.

GHARIB: Very good information. Thank you so much for coming on the program.

WORTH: Thank you, much obliged.

GHARIB: My guest tonight, Carter Worth, chief market technician at Oppenheimer and Company.