The growling beast threatens to now burst out-of-Africa and subdue global society; which was already hinted at several days ago by emerging reports. In fact the U.K. had suspended arrivals first; and now everyone is following. The story is fluid as developing; but while the market's belated reaction is dramatic in superficial scope; it is not evoking the same responses of Covid's 'dawn'.

The message to the market (and society) is: we don't know enough yet; but at this point politicians aren't going to be asleep at the switch like early last year; nor will (hopefully) big-pharma only focus on mediocre vaccines that can't be widely distributed to disparate (and desperate) populations on a global basis.

Another message was that they nailed overly-bullish Oil traders and pushed a backwardation situation hard (longer options); making it likely this is a purge it seems both justified and insane; probably precedes a washout and rebound if OPEC follows next week with a cancellation of increased production quotas.

All activities Friday were exaggerated, with most traders and money managers disengaged over the holiday weekend; and so you had impulsive reactions as well as a bit of illiquidity as has been sort of evident for a couple weeks now in general; and certainly air-pockets on an abbreviated session like Friday's.

In the market; of course it makes S&P 4700 look toppy; although if any of the solutions look promising; it could actually denote a low-point next before year-end upside finds a footing or starts slow (likely not robust) recovery efforts.

In-sum: the epidemiological data is currently limited; thus premature to grasp the future of this. But it's not 'all bets off' either. Some immunity exists, and all that is more than was present at Covid's start. On the other hand S&P was so high based on a handful of mega-caps focused on total economic resurgence and we're not really there. Risk has exceeded big-cap potential for some time.

If the US retains enough pre-existing immunity from vaccines or having actual Covid; then at least two-thirds of our population is somewhat protected. Well I have to say 'maybe', because it's too soon. We are dealing with preliminary as well as non-peer-reviewed data from South Africa; travel is being closed down from Africa, and that is 'not' a big mistake as some think; but it may be too late already in terms of the transmissibility of this new outbreak and rapid spread.

The Delta variant still remains a big concern in the United States. I speculated it might result in a 'surge' in cases after Thanksgiving or through Christmas; it probably will. Many people will extrapolate that as the 'Om' variant but it won't be on any scale. 'Hopefully' there is time to develop new vaccines or antibody treatments or antiviral pills that are 'adequate' if this spreads; but sure, it all is putting a bit of a damper on excessive cabin-fever stoked optimism.

Travel restrictions unfortunately will NOT stop the new variant from entering the United States. Furthermore; the Southern Hemisphere is really in trouble with this; because as I have pointed out for a year; you won't vaccinate really a billion people in Africa, or another billion in South America, sufficiently with the new-technology-based vaccines. Refrigeration storage; medical personnel and compliance are among issues. They're issues in parts of Eastern Europe (if we dare say less-refined if not enlightened populations) or Asia as well, and it isn't helpful to see how many with some education embrace misinformation. It might be worth noting not all of the misinformation is without kernels of truth; a problem that makes it hard to distinguish what is worth considering or not.

However, to my point: you need either monoclonal antibodies, drops / sprays; or antiviral pills (or all of the above) to cope with this challenge globally. That's been the case, it's frustrating but still the case; and all Fall (broken record yes, but correct) the #1 concern has been a resurgence of Covid, not Fed policy.

I've used the analogy of the Salk vaccine for Polio; which was an injection as most of us in my age range received. Then came an oral Sabin vaccine which to this day is distributed throughout mass-populations in sub-Sahara Africa or similar; since it is possible to administer by a teacher or even a soldier and no medical professional is required to help inoculate a given population. 

The politicians and medical/pharma establishment focused too early too much on vaccines and not monoclonal antibodies or pills. That was a problem. Now we'll see if some funding goes to novel approaches that aren't available solely to the well-developed world (which also hasn't enthusiastically embraced any of the existing vaccines; and where they've tried to, there is anxiety about the wisdom or even long-range implications; besides waning efficacy). We'll see.

Of course to have some worthy upside very near-term (offsetting tax-loss last phase pressure) is tricky, and has provisos. That must be proclamations from the big (and little) pharma companies that they can handle the 'Om' variant as we're nicknaming it for now.

Policy makers are in panic; people surely frustrated; stop losses (as I disdain) are being tripped helping trigger selling; at the same time selected stocks are defying the superficial drop and stabilizing. Monday almost certainly will see a spate of margin calls / compelled liquidations regardless of how we open; and then the prospect of some chop leading to a rebound becomes probable.

Certainly the VIX term structure a couple weeks ago suggested volatility (drop in the S&P) was possible; while the VIX today is basically suggesting opposite (S&P about to rebound). No it won't take a meteor strike to kill stocks further; it would take a failure of medical science to convince 'investors' (if not society which will remain divided about anything it seems) that they can address this.

We do 'not' yet know that the 'Om' variant (Greek letter nickname it's given for now) will be mitigated at all by the existing vaccines. Pfizer says they can do a newer vaccine in about 100 days; but we think that was their plan 'anyway' as for some time we've known they were working on re-formulating it entirely.

I personally am hoping the Pfizer pill is good enough to avoid any booster; as it would prevent injecting more of that stuff; and just carry the pill if needed. If there is a more-proven vaccine say a year from now; that could be viable too. (Vaccine testing takes longer; antibody trials go fast on already sick folks.)

In Friday's brief session, of course Oil and travel stocks and aircraft etc., were among hits; but also most of S&P's drop is 'continuation' of selling pressures. Do keep in mind that Austria and others started lockdowns before now; travel that was promoted heavily was premature in my view (though airlines geared up of course for more travel this winter, will likely be compelled to hit a pause button on scheduling, but probably just temporarily); however we shall see.

The very large Strategic Petroleum Reserve release will hit the market just as global retrenchment occurs due to the 'Omicron' story. Lockdown restrictions likely are forthcoming (maybe Germany, Spain and others); France avoids politics of this by taking another approach: moving troops to seal the border (and that isn't even being reported in U.S. media that I've noticed anyway). Disrupting traffic flow in the contiguous EU states with enforced national borders is what happened in early-Covid (I think Spain and Italy started that last year).

To recap: stock market is actually about the same outside of mega-caps; and some small stocks gave interesting light trading entries on the morning’s drop.

Most Oils and mega-caps did not come back much; and remained heavy. But pretty much everything came off morning panic-driven lows; and once again it almost never proves wise to play bearishly into/after weakness. Last year was different: we forewarned of Covid before it was a U.S. factor; but felt it would become a big problem (unfortunately it did). And we caught the March low as you know; primarily because of abject panic in public-media even after a Fed statement had already been issued about supporting economic viability. 

After this normally quiet post-Thanksgiving session, and the ensuing drama on the 'O' variant; many stocks are barely off recent highs; were overowned and overextended as far as the big-caps; so were vulnerable for a shakeout. 

We never retracted the hoisted ‘red flag’ warnings of the last few weeks, and a skepticism about the late-year behavior due to unusual tax aspects. But this was so dramatic in the Index, that Friday morning was interesting more for nimble trading entries rather than for positioning because of broad market concern.