WILL SELL-OFF BEGIN IN DAYS?

Back in April, he laid out a roadmap for stocks, which assumed a mid-year rally before a major collapse.

In his July note, he reminded us that his call was unfolding. And he does so again in his note today:

“In terms of markets, the route map I set out in early April and which I affirmed in early June continues to play out extremely well. After correctly calling the late March/early April 1420 high in the S&P500, and also the early June (1270) low, we have also now fully captured the risk-on rally in stocks and credit that began in early June…”

So, what’s next?

Well, this is when things start to get ugly.

“I now think the correct thing to do – as I also said in April and June – is to prepare for a serious risk-off phase between August and November,” he reiterated. “Over the August to November period I am looking for the S&P500 to trade off down from around 1400…by 20% to 25%…to trade at or below the lows of 2011.”

He argues that the key drivers of this sell-off will be disappointment at next week’s Federal Reserve Jackson Hole speech and realization that the ECB won’t be be able to deliver on their promises.

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