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Market Brief
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The Volatility Index (VIX) tells all that you need to know today. The ranges are starting to expand as volatility rises. Aggressive breakouts to intraday swing lows and liquidity pools are being targeted and then the move goes the other way. The spread of Omicron into the USA set the course for the reversal in equities into the close last night. COVID-19 and its variants are bound to dominate again today. This means there is a high probability yesterday’s moves continue today with a possibility of a reversal at NFP tomorrow. Other than the disease news, we have EU unemployment data for October, which is expected to come in lower than previous readings. There will be some news headlines coming out of the JMMC and OPEC+ meetings, so oil is likely to move away from a level into the US Open, which would then lead into the US Initial Jobless Claims and Continued Claims data.
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Thankfully there is only one Fed speaker today and Bostic is scheduled to talk before the US open, so we shouldn’t get the whipsaw price action like we had yesterday with Fed Chair Powell’s 2nd day of testimony. Powell’s testimony seemed to confirm Tuesday’s message that the tapering of the asset purchase programme would be accelerated at its 15th December meeting. The TLT is being bought up as insurance against a market crash brought on by the rising COVID infections. But it also makes sense that as the Fed reduces its purchases more money managers would take any opportunity to hold more government debt as it still pays a positive yield for the time being. In fact, the Fed’s taper is a net positive for the economy as instead of the interest being paid on the debt being put back into the US Treasury, institutions will receive that income which is in my book a monetary transfer from the government to the non-government.
The forex heatmap is suggesting a risk-on day as the yen and Swiss franc cannot catch a bid. Whereas the commodity pairs and pound are all trading with relative strength against the safe-haven currencies.
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Most traders on the ActivTrader platform are bullish on the EURUSD but the momentum and price action are still indicating lower prices to come. Following the recent report of higher-than-expected European consumer price inflation in November, the producer price report is expected to point to further rises in the pipeline. There is no talk yet of the ECB moving towards a more Hawkish stance, so the policies are diverging between the euro and the greenback.
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Yesterday set up for a bearish Inside Day chart pattern and assuming the OPEC+ meeting settles with keeping the status-quo, a break of the mother candles low will result in a sweep of the double bottom. A tight market and a more Hawkish tone around COVID and we could see a move higher after the liquidity has been grabbed. More lockdowns across the globe and the price of oil will plummet.
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With regards to things plummeting, the Nasdaq has so far followed the script laid out earlier this week, with a higher probability of another leg down today to commence with a break of yesterday’s lows. My gut tells me that any news on the debt ceiling that is working towards a continuation of the current resolution will be bullish for the markets, anything that suggests a Federal Government shutdown will be bearish. NFP will be the catalyst for any moves but the direction I feel will be based on the debt ceiling and further developments with Omicron.
