“BofA Merrill Lynch technical analyst Mary Ann Bartels is out with her 2013 outlook, and it contains a bit of a dire prediction for investors.
Bartels says that if certain underlying market trends don’t turn around soon, there could be a big correction in stocks that ushers in a bear market next year.
“We expect the US equity market to remain strong moving into year end 2012 and into early 2013, but the risk of a bear market in excess of 20% beginning in 2013,” she writes.
There are three things that have Bartels worried. The first is the advance-decline line, which she says hasn’t confirmed the recent rally in stocks.
(The advance-decline line measures the number of stocks that are rising, less the number of stocks that are falling.)
Below is a chart showing the S&P 500, which has rallied, while the A/D line has remained flat: ”
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