Peter Lee, Chief Technical Strategist at UBS in New York, asks where US equities are in terms of the key economic cycles and models of investor behaviour. These comprise i) The 4 Stages of a Bull Rally; ii) The Cycle of Fear, Greed and Hope; and iii) The US Economic / Business Cycle.
He also examines the US equity market between 1964 and 1984, which is “strikingly similar” to the market from 1994 to present, and looks at how this can help us to forecast what happens next.
Based on the above analyses, Lee concludes, “The cyclical bull trend that started on Mar 2009 has entered into the third-stage of a four-stage bull market rally… This is often the emotional phase of a bull rally where the investment public (retail investors) are active and institutional investors chase returns. We also believe the structural sideways trend that began on Mar 2000 will likely end as well. Both of these trends (i.e., cyclical and structural) may reach their respective inflection points as early as the next 6 months to 2 years.”
See UBS’s November 2014 Technical Market Outlook, covering the major US Equity Indices, S&P 500 Sectors, International Equities, Currencies, 10- and 30- year US Treasuries, and Commodities.