The immediate cause of the current economic situation is the Covid-19 related economic sudden stop and the inability to revert to normalcy. In that sense, an efficient Covid-19 vaccine effectively ends the recession. Thus, all stock market pullbacks are bought with any positive news about the vaccine – this is the vaccine put. Since nobody knows whether or when we will have a vaccine, shorting the stock market is a dangerous game.

However, the unfolding deglobalization is the major long term negative variable for stocks, even without the pandemics. It’s obvious that corporate profits will evaporate as the US and China decouple. The Hong Kong situation is just the beginning.

Furthermore, it is becoming more likely that Biden will become the next US President – in fact the Economists assigned a 99% chance of a Biden win on Nov 3rd. Even though the Biden Presidency could eventually be good for the stock market, the immediate effect will be negative as the US corporate tax rises, in addition to other policies targeting the end of “shareholder capitalism”.

Note, there is also the Fed put, but the Fed already fired the big bazooka.

The Covid-19 related events are at this point only causing the short covering and thus inflating the bubble. As any bubble, predicting the top is impossible, but I will give it try. At this point, SP500 is attempting to breach the key 3200 resistance, and the next level will be the new all time high. Alternatively, the 200dma is still the key support.