[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.

[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!

[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.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

My somewhat humorous headline contains some truth in that hope for a Santa Claus rally is alive and well but has been met with resistance due to intensifying omicron fears with a resurgence in the number of Covid cases, which have been blamed on the variant.

To be clear, the Santa Claus rally may still materialize, as “Stock Trader’s Almanac” considers it to be the period including the last five trading days of the year and the first two trading days of January. That means, all hope is not yet lost.

Today was simply a continuation of Friday’s slam with dip buyers again being conspicuously absent. Commented Jim Paulsen of the Leuthold Group:

The downward move in markets “reflecting growing uncertainty surrounding whether the Omicron surge will bring new widespread economic shutdowns, an unexpected shelving of additional fiscal stimulus from President Biden’s Build Back Better plan, and a breach by the S&P 500 index of its 50-day moving average.”

Today, there was no place to hide, because growth, value and SmallCaps were equally hammered, as was the tech sector in general. Even the low volatility SPLV ETF was not able to withstand the selling and gave back -0.31%.

The major indexes swooned in unison and bounded off their worst levels of the session, but it was not nearly enough to even think about a green close. Interestingly, the S&P 500 closed today within 1 point of where it started the month of December, so not much has been gained or lost during this period, despite the index having just suffered its biggest 3-day drop since May.

The most shorted stocks surrendered Friday’s victory, as ZeroHedge pointed out, while the US Dollar was not able to build on its recent gains and ended up bouncing lower. Gold held steady for most of the morning, that is until the bears put another nail in the coffin and sent the precious metal down -0.81%.