Monday, January 24, 2022

Stock Market Correction

Why? Tapering of QE (QT) and future interest hiking in the United States seem to be the main reason. This leads to a re-rating of risk and thus a repricing of bond and equity markets. Equities in the technology sector will feel the most pain, since their cashflows are furthest out, and therefore being hardest hit by discounted cashflow analysis.

Is it a correction in a cyclical bull market? Or a cyclical bear market in a secular bull market?

For as long as we stay above 14.400, NDX 100 Index, I will believe it is just a much needed and healthy correction. Do we get below that number we are probably in for the latter notion. Time will tell. The next 6 months are going to be important. (cyclical bear market in secular bull market is becoming more likely)

From an Elliott Wave perspective I adhere to the notion that we are in GSC3, SC3, C1, P3 and I3. I would expect P3 (secular bull market) to end somewhere near 2030. In this decade I would expect the main indexes to quadruple.

Anyway both SQ and TSLA stay in my portfolio whatever the scenario. I'm not selling. For the moment both are destined for 2030. In a secular bull market, which I think we are in, it is not about "timing the market" but "time in the market".

When there is blood in the streets, the fearless should get greedy. I therefore seek opportunity to buy additional shares in SQ and TSLA in this upcoming dip or crash. Not yet though. Somewhere in the next half year, near extreme fear and at high volatility levels. (volatility levels are increasing)

Don't hang your hat on this kind of analysis. It will probably be wrong. It is a human and therefore feeble attempt to create some order out of seemingly random market movements.

This is not investment advice. Do your own research. Please also read the disclaimer at the bottom of the blog.