The rapidly spreading variant engaged the bears yesterday with a nasty gap down that created new lows in the QQQ and IWM while the DIA and SPY held above early December lows.  This morning the futures point to another big overnight gap putting traders willing to rush back in at high risk. However, plan your risk carefully, with volumes likely to decline heading into the Christmas shutdown and the pandemic economic uncertainty.  Expect the whipsaws and overnight reversals to continue as we approach the significant overhead resistance levels.

Asian markets closed green across the board last night, led by the Nikkei surging 2.08%.  European markets also want to shake off the pandemic concerns showing green across the board this morning.  With another light day of earnings and economic reports, U.S. futures point to another big overnight gap keeping the risk high for those willing to rush back into the fray.  Don’t rule out the possibility of a pop and drop at the open and watch for head fakes and intraday whipsaws as volume contracts due to holiday travel.

Economic Calendar

Earnings Calendar

We have 15 companies listed on the earnings calendar as we head toward the holiday shutdown.  Notable reports include AIR, APOG, BB, CAMP, FDS, GIS, NEOG, & RAD.

News & Technicals’

The Biden administration will deploy 1,000 medical personnel from the military to back up hospitals if they face a wave of omicron patients in January and February.  The White House also purchases 500 million at-home Covid tests that Americans can order for free through a website starting in January.  On Monday, the Centers for Disease Control and Prevention reported that omicron is rapidly spreading and is now the dominant variant representing 73% of U.S. cases.  In January, the Senate will vote on the Build Back Better Act despite Sen. Joe Manchin’s opposition to the bill, Majority Leader Chuck Schumer announced.  Manchin dealt a crushing blow to President Joe Biden’s top domestic priority, which would invest in the social safety net and green-energy programs.  It is unclear if Democrats will try to pass a smaller bill that includes only the Build Back Better Act.  The enhanced child tax credit, which the bill would renew, expires at the end of the year.  According to data published Monday by the Centers for Disease Control and Prevention, the rapidly spreading omicron variant is now the dominant Covid strain in the U.S., representing 73% of sequenced cases.  Omicron has displaced the previously dominant delta variant, which CDC data shows is now an estimated 26.6% of sequenced cases for the week ending December 18.  Treasury Yields edged higher in Tuesday morning trading, with the 10-year trading up to 1.420% and the 30-year rising to 1.849%.

Fear of possible economic impacts from the rapidly spreading variant brought the bears yesterday, creating new lows in the QQQ and IWM.  However, DIA and SPY held at lows higher than the beginning of December, providing some hope that a relief rally could soon occur.  Unfortunately, the technical damage has left significant price resistance levels above that may now harbor entrenched bears willing to defend.  As volume begins to contract due to the Christmas travel, the question to be answered is wheather traders weary of the wild volatility will be as willing to take the high risk of rushing back into risk.  This morning futures are attempting to inspire buyers with another big overnight gap.  Will it trigger a short squeeze, or could it be just another pop-and-drop trap?  The risk is high so plan your risk carefully, my friends.

Trade Wisley,

Doug