[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite the major indexes bouncing around in a narrow trading range, the S&P 500 managed to notch its 70^th record close of the year, while the Dow rose for the 6^th day in a row.

Traders hope to not only end the year on a high note but also that this positive momentum will carry at least into the first two trading days into 2022, thereby validating the Santa Claus rally concept.

The tech sector struggled today with the Nasdaq closing just about unchanged, as bond yields spiked thus taking the starch out of the “growth” section in general.

Sentiment continues to weaken, because of potentially tighter monetary policy and the impact of the Omicron variant, the virulency of which remains questionable, as death and hospitalization “refuse” to go along with soaring Covid cases. Hmm…

The US Dollar got whacked during this session and plunged to a level last seen just prior to Thanksgiving, while gold dropped and popped and successfully defended its $1,800 level, despite breaking below it midsession.

Economist Nouriel Roubini offered these words of caution:

As long as central banks were in unconventional policy mode, the party could keep going. But the asset and credit bubbles may deflate in 2022 when policy normalization starts. Moreover, inflation, slower growth, and geopolitical and systemic risks could create the conditions for a market correction in 2022. Come what may, investors are likely to remain on the edge of their seats for most of the year.

I will be back to write the final market commentary for 2021 on Friday.   

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

After the recent ramp-a-thon, it was to be expected that the markets would consolidate a little bit, which is exactly what happened today. While the Nasdaq gave back 0.56%, the S&P 500 ended just about unchanged, but the Dow eked out a tiny gain thereby recording its 5^th day of advances.

However, upward momentum remains in full force with our TTIs (section 3) still being firmly entrenched on the bullish side of their respective trend lines. Driving market direction are the latest pandemic news, with Omicron, aka “Omicold,” being hyped by MSM despite its mild effects.

Added ZeroHedge:

Stocks were supported early by the headlines that the CDC relaxed the quarantine guidelines for people with COVID-19 yesterday, reducing the number of days in isolation from 10 to 5 – another potential sign we may be transitioning to ‘living with virus’ normalization, but as the cash market opened Small Caps and Big Tech were dumped while The Dow pumped.

Bonds were in a world of their own with the 30-year redefining the term “rollercoaster,” as its yield swung wildly and ended up at the highs for the session.  

Both, “SmallCaps” and “growth” succumbed to weakness, while “value” prospered for a change with RPV gaining 0.49%. The US Dollar repeated yesterday’s sideways pattern and went nowhere. Gold dropped a tad but hung on to its $1,800 level.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

Last week’s upward momentum picked up steam today with the bulls clearly being in charge and pushing the major indexes higher with the S&P 500 scoring another record.

Despite a surge in Covid cases, the mood remained buoyant, at least in terms of equities, with some analysts expecting no lasting or meaningful Omicron impact on the growth outlook.

Again, the focus remains on the historical fact that, more often than not, the major indexes have sored solid gains during the last 5 trading days of the year and the first 2 of the new year. This period started today.

The session begun with a divergence, as the Nasdaq spiked higher, while SmallCaps were slammed, with the latter recovering later but trailing the former’s gain of 1.39% by a wide margin. The S&P 500 came in second place with a solid advance of 1.38%.

When rallies shift into overdrive, it’s no surprise to see “growth” outperform “value,” and today was no exception. Bond yields were mixed, went sideways, and stayed below their respective unchanged lines.

The US Dollar went nowhere and remained stuck at recent support levels, as ZeroHedge pointed out. Gold was flat but managed to successfully defend its $1,800 level.

In the end, there were no major news items affecting market direction thereby giving the bulls another day of dominance.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

Optimism, that global economies may not become derailed as feared, contributed to the major indexes not only stringing together a 3-day win streak but also the S&P 500 scoring another record close.

The gains were broad with value, growth (tech) and SmallCaps all participating with similar advances. The only fly in the ointment was that volume was low due to the upcoming Christmas weekend and tomorrow only featuring a shortened trading session.

Explained Jim Paulson of the Leuthold Group:

“Much of the stock market’s rally this week is due to overdone fears last week and a palpable sigh of relief the selling finally stopped. Once the market turned higher, dip-buyers not wanting to miss out on a Santa Rally have taken charge.”

Despite worsening inflation, some of the economic data did not show any outliers. New home sales jumped despite massive October downward revisions, initial jobless claims are bouncing around at pre-Covid lockdown levels, while personal income and spending showed increases in November.

Even though stocks have rallied sharply, long bond yields have not been keeping up and have not been able to take out their “omicron” highs, as ZeroHedge pointed out in this chart. The US Dollar, while attempting a breakout, fell short as well and stair stepped to its lowest level since the beginning of this month.

Gold recovered from its recent pullback and finally managed to break above its $1,800 level after gaining 0.94% yesterday and 0.43% today.

I will post the weekly StatSheet tonight but will not report on tomorrow’s shortened session. I’ll be back for Monday’s commentary.

Merry Christmas!

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

The futures markets already indicated last night that green numbers might appear during today’s day session. That’s exactly how it turned out with the Dow sprinting ahead by some 300 points, a lead that slowly and steadily grew larger as the day progressed.

The other two major indexes joined the party with the Nasdaq taking the lead and sporting a gain of 2.40% at the close. With that much upward momentum, I did not execute the planned sale of the one ETF that had penetrated its trailing sell stop, because it thrust higher by over 2.5%.

Today’s rebound was a nice beginning after a 3-day losing streak, which is now in the rearview mirror. Traders finally caught on to the fact that the omicron variant may be highly infectious but induced illnesses remain mild. Hmm, makes me wonder if the arrival of the flu season has something to do with it?

Today, the short squeeze was back in “on-mode”, as apparently someone must have had fun by pushing the on/off switch over the last week, as Bloomberg/ZeroHedge point to in this chart.

Bond yields popped with especially the 20-year demonstrating a wild ride, most likely due its auction today, while the 10-year was far more stable. The US Dollar bounced around but remained in his trading range of the past couple of days and held tight to its unchanged line.

Europeans (EU) are facing a very cold winter in more ways than one. Their natural gas prices exploded to record highs today. To put this spike in context, ZeroHedge posted this chart from Bloomberg showing that the EU gas trades at an oil barrel equivalent of over $350!! Ouch.

Could you imagine what life with $350/barrel of oil would be like?

I won’t have a chance to write tomorrow’s report, but I will be back on Thursday to post the weekending version.

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