Is the Bull Market Over? Another Short Word on Cycles: Sunday 10 October 2021
After going on the defensive in the penultimate week of August as described here (https://kudakwashe-chinhara.medium.com/macro-roundup-wednesday-18-august-2021-89f9713c4ae5), I have been using 4290/4350 in SPX to accumulate stocks in one form or the other across my portfolios.
Why?
In mid-July, September 2021 was identified as a danger zone for the stock market (here https://kudakwashe-chinhara.medium.com/a-short-word-on-cycles-sunday-11-july-2021-5ac109ff5d9). The fact that we have just experienced the largest and longest equity market correction in almost a year, lends some support to the idea that the mentioned cycle remains in play. IF that is the case, the next major downbeat of the cycle is not until Q2 2022, therefore most of the time between now and then would experience cyclical tailwinds.
In addition, year-end seasonal tailwinds (aka The Santa Rally) lends support to the idea of stronger markets once this correction resolves itself.
The regime model is now in the “Mind the Squeeze” state, which historically suggests adding length to the portfolio.
Scenarios
1. The correction is complete, and we are now in the early stages of a move to 4750/4950 (depending on what “degree” you Elliott Wavers insist upon).
2. The correction is incomplete, and we still need to visit the 4150/4250 range, perhaps even after a quick trip back to the highs (a “Flat” for the Elliott Wavers). Only then would the next leg higher occur. Of course, this raises the possibility of a consolidation occurring until Thanksgiving as well.
