Need to Know: On an ugly day for markets, here’s the S&P 500 level investors need to watch closely, says this trader
Black Friday indeed.
Some grim headline are greeting those investors who aren’t stretching out the Thanksgiving holiday into a long weekend, with news of a new COVID variant — B.1.1.529 —detected in South Africa. It’s the most heavily mutated so far, which means it could be more transmissible and less effective against variants.
It’s exactly what investors didn’t want to hear as we close in on two years since the pandemic first reared its ugly head in China.
Just about everything associated with risk is in the clutches of a deep selloff, which could make today’s session either a basket of bargains or a buyer-be-wary basket case.
A team at Saxo Bank advises traders to “tread with extreme care, given that near term volatility risks are extreme on the unfortunate timing, particularly giving the sudden shift in focus that this news brings relative to recent themes and current market positioning.”
The one mercy for Friday is that it’s a shorter session for Wall Street.
Our call of the day comes from Sven Henrich, founder of Northman Trader, who has been up early, scanning the charts and offering up the levels investors need to watch. And the winner, so to speak, for the S&P 500
is 4,550, the high for early September.
“As long as this area holds bulls are fine as this could simply be a back test of the breakout,” he said in emailed comments. “A sustained move below and bulls are in big trouble, but if that area generally holds, then I suppose a end-of-year rally is still possible.”
Some current problems for this market — it’s expensive by one measure he says, with the forward price/earnings ratio for the index at around 23. And investors are fairly long stocks, with more poured into equities this year than combined over the past 19 years. See below for that chart from Bank of America.
“The response to this mutant should be the same as the response to any mutant virus. for years we have constructed new vaccines based on new mutations in influenza. It’s no different for Covid and no more of a threat in that sense. Can you imagine if the stock market reacted every time there was a new influenza variant that required a new vaccine?” said Durand in emailed comments.
“We don’t even know if we will need a new vaccine yet and they are speculating today. This is an excuse to sell, not a reason to sell. If you want to sell for a good reason, good but if that’s all you’ve got you may as well go to Las Vegas and place all of your life savings on red,” he said.
are tumbling, with airlines sinking, and Asia had an ugly session, with the biggest losses seen for Hong Kong’s Hang Seng
which slid 2.6%. Treasury yields
are tumbling, gold
is surging, along with the yen
and Swiss franc
The World Health Organization will hold an emergency meeting on Friday to discuss the newly detected COVID variant, which could be named “Nu.” South Africa’s health minister Joe Phaahla sounded the alarm on Friday, over the new variant that has 32 mutation in its spike protein — double that of delta. The U.K. and Israel have clamped down on travel from South Africa and other nations in the region.
share are all down 7% in premarket, following selloffs for Deutsche Lufthansa
and British Airways owner IAG
Vaccine makers including Pfizer
of course, are headed the other way.
etc. will all be in the spotlight as it’s one of the biggest shopping days of the year. Note, Gap
suffered big losses Wednesday after some grim results.
Equities have seen a record $893 billion in inflows this year, surpassing a combined $785 billion of inflows seen over the past 19 years, said Bank of America, in its Flow Show report. Here’s that chart:
A Chipotle ad during Thanksgiving Day football got people talking, if not confused.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.