Will The Bulls Show?

In this week’s Dirty Dozen [CHART PACK] we look at short-term oversold conditions in the SPX and what that means on a walk forward basis. We then look at troubling credit technicals, some COVID charts, historical divergences in Europe, rate hike pricing, a call for 150/bbl oil, and a LatAm E&P, plus more… 

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  1. The market hit extreme short-term oversold levels last Friday. It’s in a Bull Quiet regime and therefore the onus remains on the bears to prove that this dip won’t get bought. 

  1. Here’s the three week forward returns for every past instance over the last 20-years. The market shows a strong bullish bias (as expected). This is doubly true when you add the filter of a Bull Quiet SQN regime. 

  1. But, as I’ve been writing for the last two weeks. Trend Fragility is extremely high at the moment. This means anything can happen… so, we need to stay on our toes and wait for price to tell us what’s what. 

The RoC in BAA Yields is one of the many inputs that’s adding to this increased trend fragility. It’s risen to levels that have coincided with extended periods of market volatility. 

  1. I wrote last Monday how the COVID winter wave narrative was about to hit fragile markets. That happened sooner than expected with the recent concerns over the new Omnicron strain. It’s still too early to speculate on what impact the new strain will have but regardless it looks like we’re starting another substantial winter wave. 

  1. Trevor Bedford, a mathematical epidemiologist posted this thread on twitter the other day where he lay’s out some of the unique characteristics of Omnicron versus the other variants. The below chart shows the substantially higher number of mutations to the S1 domain of the spike protein versus the other known strains. If you don’t understand what any of that means, you’re not alone… 
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Disclaimer: All statements are solely opinions and are for educational purposes only.

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