Probability Map March 8

Meta Strategy Derivatives Portfolio – Probability Map Update.

— Updated March 12, pre-market —
— Updated March 9, pre-market —

The ongoing corrective stock market move continues to take stair steps down. Last week, this pattern accelerated to the downside, while the amplitude of each swing increased — fast drops were followed by massive reversals.

A further normalization of excessive speculation and sentiment is the highest probability scenario going forward, as rising bond yields put increasing pressure on the stock market.

The passing of the US stimulus bill over the weekend may catapult the market into a blow-off rally, however, as more liquidity flushes into the market. I remain skeptical of that scenario, as a sell-the-news outcome looks to be equally likely, especially given the enthusiastic expectations.

As usual, I map my current data-driven estimates of the probabilities for future returns of the S&P 500 over the short, medium, and long term.

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