Autumnal Equinox Update: Saturday 26 September 2020

The Autumnal Equinox brought the sixth regime shift since the beginning of this blog. The model now estimates that we are in the “Sell the Rip” regime and does so with an upper-quartile “conviction”. This is signal strength is similar to the early stages of the Feb/Mar melt-down and July melt-up.

Given that the Composite LT Cycle reaches its zenith in early-October, the model suggests that we are at or approaching a game-changing event/period which will have significant implications for the global economy.

The question is: Was that THE top in early September? For some segments of the market, the answer is most likely yes. After all, many segments are materially below previous peaks and have not really rebounded a.k.a. The K-shaped recovery. So the question centres on the major drivers of the rally i.e. tech names and especially the big players.

Following are some of the stocks I have used recent weakness to build length into (targets up to the top of the blue boxes).

So, yes, I think the market is toast but before the real fun and games, I think tech can have a final blow-off hurrah. There are some short-term seasonal factors in the 3rd quarter of the year that can coincide with just such a move. Perhaps this all happens into the election.

Nevertheless, certain aspects of my portfolio are increasingly reflecting the dark outlook for 2021/22. There are many stocks with option prices to Jan-2022 and Jan-2023 that reflect a severe under-pricing of the risk that they will more than halve in value by then.