1. Moving the markets

Despite the futures markets showing solid gains across the board last night, a sense of reality returned this morning, with all indexes opening to the downside.

A mid-day rebound ended in disappointment, as the bears asserted some strength and pushed the major indexes towards their lows of the session. However, this really comes as no surprise considering that the S&P 500 merely retreated from its record high set on Friday.

Adding to the uncertainty were continued jitters about the omicron variant and its potential economic impact, despite a host of scientists and physicians playing down its severity, but MSM is staunchly focused on fearmongering.

Also on traders’ minds is the outcome of the Fed’s two-day meeting to be released on Wednesday, with the main topics being the possible acceleration to end the bond-buying program, along with any thoughts of interest rate hikes. The Fed must handle both events with kid gloves and tread lightly, otherwise investors might be spooked and hand the baton to the bearish crowd.

Last week’s massive short-squeeze, which peaked on Wednesday, ran into a brick wall and gave up all gains, with the underlying shorted stocks now doing what they are supposed to, namely drop.   

Bonds rallied as yields dropped, and the US Dollar recaptured Friday’s losses in one swoop. Gold mainly bounced above its trendline yet only managed to score a meager gain of 0.17%.

All eyes are now on Wednesday’s Federal Reserve policy decision.  

1. Moving the markets

Despite some early wobbling, with the major indexes dipping below their respective unchanged lines, dip buyers stepped in late in the session and drove equites to a green close. The rebound effort was led by the Nasdaq with a 0.64% gain, while the Dow lagged but managed to advance by a tiny 0.10%.

The positive mood was the result of traders viewing the influence of the Omicron variant not as frightening as originally thought, thereby crossing one item off the worry list—that is for the time being.

Aiding the late afternoon rebound were announcements by Pfizer and BioNTech saying that “three doses of their vaccine are effective at neutralizing the omicron variant,” according to their own lab tests. They also pronounced that taking two doses still protect against the disease.

The award for the most chaotic roller coaster ride of the day goes to SmallCaps, which pumped, dumped and pumped and outperformed. Bond yields took an early dive, recovered, and stormed higher with the 10-year ending the day at 1.52%.

The US Dollar took a drop today by losing 0.48%, which allowed gold to built on yesterday’s bounce-back. The precious metal also was stuck on a wild ride, gave up mid-session gains, and closed just about unchanged.

I will be out tomorrow but will be back on Friday to write the week ending commentary.

1. Moving the markets

Yesterday’s strong recovery set the tone for further advances, as the bulls proved to be the dominating force after the opening bell rang. There was no hesitation as to the direction with higher prices being in clear focus for this session.

As a result, it was a one-way street with buyers being in charge because of lessening fears of any potential negative economic impact caused by the Omicron variant. In the absence of such worries, at least for this day, the major indexes stormed higher with especially the beaten down Nasdaq sporting a solid comeback of over 3%.

The revival was broad based, but it remains to be seen if any reappearance of Omicron headline news will keep traders in the game, or if we’ll be heading back from a one-way street to a two-way street.  

“Growth” trounced “Value” by a huge margin with RPG gaining 3.58% vs. 1.43% for RPV. SmallCaps had a good showing too with VBK gaining 3.12%.

Posted Zero Hedge:

Omicron’s ability to evade vaccine and infection-induced immunity is “robust but not complete,” said the research head of a laboratory at the Africa Health Research Institute in South Africa.

That news item took the starch out of upward momentum late in the day, with markets dipping and then ripping, a phenomenon that was especially apparent and unexplainable in the Nasdaq due to the index gaining 100 points in 4 minutes. Huh?

Of course, none of the above would be possible without solid support from another short squeeze, which was simply a continuation of yesterday’s ramp.

Bond yields rallied with the 10-year digging itself out of a deep hole for the second day in a row. The US Dollar danced within its recent trading range but closed slightly lower. Gold ended near its intra-day highs and gained a modest 0.30%.

It was another good day for the bulls. Is this the much hoped-for Santa Claus rally?