Charts say stocks near bottom, poised to recover - Fortis Private Bank

Equity markets have found a bottom and are poised to hit new highs in the second half of this year, according to a senior chartist at Dutch-Belgian bank Fortis.

Paul Nesbitt, London-based technical analysisdirector at Fortis Private Bank, told Reuters on Monday that the Dow Jones industrial average may rally to 15,781 points this year, a gain of more than a quarter from Friday''s close of 12,325.42.

His forecasts, based on trend lines linkingthe market's recent lows as well as technical analysis such as Wave Theory, applied to European stock markets as well as older Asian equity benchmarks such as Hong Kong's Hang Seng and Singapore's Straits Times Index, he said.

"I would expect these markets, based on history, to hit a new high," he said, adding that many technical indicators showed the markets'' recent reverses were "corrections within an ongoing bull" rather than the start of a bear market.

The exceptionwas Japan's Nikkei 225 index, which is still in a bear market trend, he said.

He also said many stock markets have given up about 38 percent of their gains since the start of the latest rally, which based on Fibonacci charts, suggestedthe markets have found a bottom.

Some investors use charts rather than economic fundamentals predict movements in financial markets.

One of the most popular charting methods involves the use of Fibonacci numbers, based on the work of a 13thcentury Italian mathematician, which suggest markets tend to find support or resistance at certain "golden ratios" commonly found in nature.

Elliott Wave, another popular charting tool, predicts markets rally in a certain pattern with threeperiods of gains interspaced with two periods of correction.

Turning to other markets, Nesbitt said he recommended that investors pare down their exposure to U.S. 10-year bonds as yields could begin to rise sharply and soon.

Historically, the May/June period was the time when the outlook for bond yields and interest rates typically changed direction.

He also said oil prices could fall to around $90-95 per barrel in coming weeks, from just below $110 currently, although the upward trend in prices remained intact.

According to him, oil appeared to be approaching the end of the third leg of an Elliott Wave formation, which suggested the commodity could lose 38 percent to 50 percent of its recent gain before resuming its uptrend.