Pullbacks of between 2.5 and 4.0 perecent are expected for US equity markets, according to Ron Meisels at Phases & Cycles.
Meisels thinks that conditions are developing to suggest the current advance is ending and that US equities may experience 2.5 to 4.0 percent pullbacks. However, he expects such pullbacks will be followed by a re-assertion of the major bullish trend.
Evidence for Meisels’ view comes from several areas:
1. Price action has become more choppy and laboured
2. The Dow Transports started to correct in mid-October and there is growing divergence between it and the Dow Industrials
3. Negative divergence in the S&P 500’s internal momentum is increasing
4. Upside volume is starting to decline
5. The NYSE daily advance/decline line made its last high three weeks ago
6. The percentage of NYSE stocks above their respective 50-day moving averages has dropped to 55.8%
7. The latest Investors Intelligence survey is extremely bullish (64.4%), usually a contrarian indicator
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