With weakness in equities in June and across risk assets generally, the bears are out in full force. Technicians almost to a man are telling us that we're now into a severe notable downtrend, or indeed, a bear market. Whether you look at the death cross, the 50 day moving average crossing the 200 day moving average on the way down, or whether you look at Dow theory, or whether you look at lower lows and lower highs, technicians almost to a man believe we're now in a sustained downtrend in equity markets.

On top of that, macro has weakened. Data is disappointing. The ISM disappointed. US retail sales last month disappointed. IFO, PMIs are disappointing and convincing many that a double dip is on its way.

Whilst there is plenty more on top of that to worry about, whether it's sovereign debt crises, the banking stress that causes, or indeed, an over tightening in China and a collapse of their housing market.

But in our mind however, despite all that backdrop, markets are well set for a summer rally for three good reasons.

The first key reason is the positioning of our indicators, our one to three month medium-term indicators, which are flashing up multiple buy signals.

Whether you look at how oversold the market is, as oversold indeed as it was during the global financial crisis, or whether you look at risk appetite which has beaten up and back on buy, or indeed, sentiment which is very bearish and a great contrarian indicator, all of these, coupled with some valuation indicators which are showing that equities are extremely cheap relative to bonds and cash in the UK, the US and the rest of the West. All of these indicators are flashing by and supporting that summer rally thesis that we laid out.

On top of that, secondly, macro. Yes, of course the macro data is slowing, but this is typical and just as you would expect in phase two of a stylised cyclical bull market.

Phase two you will remember is the consolidation phase. Consolidation from the rapid gains in phase one, the initial rally out of the bear market. In phase two, the macro data slows. Leading economic indicators go flat. PMIs come off their highs. ISMs come off their highs. Data is a bit softer.

But the key here is the economy doesn't slip back into recession and it doesn't slip back into recession because the corporate sector is lean. It retrenched in the recession. It's already throwing off spare cash flow when it gets to phase two and the markets adjust as if there is a mini cycle in play. Mortgage rates come off, oil price comes off and this all supports the economy through this soft patch and underpins its reacceleration.

On top of that, we see a credit cycle in the States that's turning and turning for the better whereby banks are making money and will start that lending process once again to reinforce the upswing coming later this year and into 2011.

So yes, the macro is slowing, but actually that's typical of a phase two and therefore, not to be something to be scared of and not a reason to expect a double dip.

On top of which and finally, the third key reason, the price action of markets is typical around the world, in the West and indeed, in emerging markets, of a phase two of a stylised cyclical bull market. That consolidation of those gains, give back of between 8, 15 or even 20 per cent in phase two after very strong rallies in phase one.

So for all those three key reasons we think markets are good for the summer, good for a rally July into August whereby we may see some further weakness to mark the end of phase two before we move into phase three, the beginning of a sustained uptrend in markets once again towards the end of the year.

That was the Longview. You can download this programme from iTunes store, from Cantos's website, or from our website www.longvieweconomics.com. Do get in touch through the website if you have any questions. We hope you've enjoyed watching. Look forward to seeing you next month. Goodbye.