Equity markets will remain under pressure until at least the end of the year, according to Ron Meisels, President of independent research house Phases & Cycles
As the bull markets move into a new phase, Meisels notes that a divergence is growing between price action in the US and price action in the UK and Canada. The US markets appear to be in an advancing leg 3 of a bull market, whereas Canada’s TSX appears to be embedded in a leg 4 down that is threatening its October Lows. Meisels warns that should the October lows be breached, then the bullish outlook for the TSX would be threatened.
For the UK’s FTSE, Meisels is concerned that it failed to reach the upper end of its large trading range during its most recent rally. The 200-day Moving Average is gently declining and this effectively capped the rally well below the 6900 level that has marked upside resistance for over a year and a half. As such, he thinks the FTSE is likely to retreat and test the crucial 6,000 to 6,100 level. This would complete an “A-B-C, down-up-down” decline from the September high: “If the 6,000 level is successfully defended then the first rally of 2015 will go a long way to determining whether the bulls are still in control of the FTSE.”
Overall, Meisels thinks that divergence between the US, UK and Canadian markets are simply them taking “different paths to working off the overbought conditions created in the summer and fall.” He says the “underlying technical indicators still suggest that the bull market remains alive and well . And in this context pullbacks and base-building at this stage are healthy, if somewhat painful, processes.”