I’ve been mostly silent for the last couple of months as the market has been slow to react to any external factors. With a newfound sense of uncertainty, I believe now is an opportune time to discuss my thoughts on where the market is headed in the coming year.

Market resilience

Ever since November of last year, the market has largely shrugged off any bad news. NVDA and other chip stocks have dominated the market cap, while non-tech-related companies have participated very little in the strong momentum. To be fair, IWM has seen a recent surge and is just now approaching its 2021 highs. In contrast, SPY and QQQ are well above those levels, both approximately 15% up, even after this most recent sell-off. Moreover, SPY is about 70% higher than pre-COVID levels in just four years.

Anticipating a major correction

I have no doubt that a major correction is coming. I’m uncertain whether we will see a sharp decline or if it will be more drawn out over the next one to two years (or longer). My primary concern is positioning, and I would prefer another run at highs before entering full position size again.

What I’m planning

I got caught this year shorting NVDA, which significantly impacted my P/L. However, I have been patiently waiting for the right opportunity to try again. I believe that the time is now, and I will begin building up positions over the next few weeks.

I am particularly interested in the SPY 450 level. However, with the current market indifference, I believe we may see much lower prices over the next year or two as the momentum shifts.

Final thoughts

There have been no significant retests during this entire market rally since November, so I am hoping for a different outcome during the upcoming correction. Many investors have been lulled into a false sense of security during this rally and have been conditioned to “buy the dip.” I’m not sure this strategy will pay off for them.