Quick Update

Projection Update:

What projected: S&P 850 -> 956 retest (90% chance) -> 1020

What happened so far: 956 -> 865 -> 956 retest (passed) -> 1017

Today: 999

Within 1 week: more whiplash around the 1000 mark (50%), retest of 956 (50%)

Within 4-6 weeks: retest of the 900-910 range (75%), retest of the 850-865 range (25%)

Within 3-6 months: 870-1020 whiplash (75% chance), 1100-1200 retest followed by a guaranteed large crash (25% chance)

Analysis:

The longer-term projections are virtually unchanged from my last post. So far this trend had played out as if scripted, which means my analysis of the major market movers are close enough.

At this point you should be 10% long. This will be your long term holding and inflation hedge. I made a mistake during the profit taking phase by taking profit on X first before anything else. Likewise, I did not stretch my profit on financials either. Profit on X was taken around the 990 level, and I took profit on financials on the 1005 levels. In general, the mistake was not sticking to "people's favorite" stocks at the end of the trend. Hypothesis: the stocks with weaker fundamentals and earnings, but a higher following of unsophisticated investors due to being "relatively cheaper" on the year term, will whiplash and linger near the top for longer when the trend changes.

Keeping a portion long on US stocks at this point despite the trend turning is an defensible move, as long as a major force driving US stocks is inflation fear. As US stocks drop, the USD's value actually rises, and so dampen your real loss.

What to keep? I still believe in keeping defensive stocks with good fundamentals within each sectors. NUE for steel, WFC for financials, PLD for commercial RE, PHM for homebuilder, etc.

I don't recommend keeping any energy stocks as they are all overpriced. I do like MXY.TO, a new geothermal stock. Apart from having excellent fundamentals, it enjoys the psychological benefit of being a new IPO. Since there was no giant upswing on the first few days of the IPO, the current holders of the stocks are not likely to be mostly day-traders. Furthermore, a new IPO means that insiders and institutions can not sell yet due to their lock-in period. MXY.TO will surely correct like everyone else, but it should be milder than that of other energy stocks.