Risk Reset

I hope you all had a fantastic Thanksgiving. I’ve gained about 10 pounds since Wednesday evening and set a personal best with 4 pieces of pie on Thursday afternoon. Overall, I’m pretty happy with my performance over the holiday weekend, and I hope yours was just as great.

The global growth trade got punched in the mouth Friday morning. After reports of a new COVID variant (this one now known as omicron), world markets spent the final day of the week trading as though it were March 2020 all over again. Whether Friday’s selloff will turn into something more, or will be remembered as just another short-lived panic attack, remains to be seen. Several industries (mostly in the Tech sector), had enjoyed a strong November until last week, and near-term support remains largely intact.

For many other areas, though, former downside support has turned into overhead resistance. Here’s a few examples:

Crude oil fell 13% on the day.

The poor performance dropped the oil benchmark back below $77, a level that acted as support in 2011 and 2012, but then was the high-water mark for most of the next decade. You can add this to the list of failed breakouts that started showing up earlier this month.

In equity markets, the S&P 500 dropped 2.2%, with cyclical growth sectors like Financials, Energy, and Industrials leading to the downside. Industries associated with travel or re-opening were punished. Airlines were hit especially hard and are now below a level that held throughout the summer.

The future path of the broader equity indexes will likely depend on whether or not hard hit areas like these will quickly recover broken support, or whether the stronger sectors like Tech will ‘catch down’.

Nothing in this post or on this site is intended as a recommendation or an offer to buy or sell securities. Posts on Means to a Trend are meant for informational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in posts. Please see my Disclosure page for more information.

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