Market Briefing For Wednesday, Dec. 8

The surge extended and this time brought more small-caps along with what was a broad advance. Partially attributed to 'hopium' regarding reduced fears about COVID-Omicron, and ignoring the Powell-Fed-Put for the moment, S&P (SPX) forged ahead to where we needed to see 'confirmation' (over 4600-4650).


Of course we don't buy strength or sell confirmed moves, but we do anticipate that the recent 'tip your toes in the water' buys of speculative stocks in periods of purging, was the reasonably speculative, but fairly wise thing to do. Ditto to retaining core positions in Oils and tech big-caps, most rebounded nicely.

Executive summary:

  • Market extension is pretty impressive, and broadened importantly beyond the S&P, regardless of some typical trimming towards the day's end.
  • A lot hinges for the moment not on the Fed, but on whether this was just glorified short-covering or 'actual' hope Omicron is not a huge horror.
  • Of that it's unclear, 5 more countries in Europe were added to the 'do not travel' list (for the upcoming holidays), and that reflects spreading abroad.
  • It's going to take a couple weeks to ascertain whether all the optimism is premature with regard to Omicron, and I think the last hour's travel alert is a factor in Airline or related travel stocks entirely reversing earlier gains.
  • A Court is delaying the Federal vaccine mandate but so far New York City's goes into effect January 4, with many firms delaying return-to-work, as the level of COVID infection (primarily Delta) remains about the same.
  • Regardless, all this behavior validates our idea of 'dipping toes in water' as far as speculative stocks in weakness during recent purges, not rallies.
  • The sell-off was wider than just the mega-caps, and the rebound was lots more comprehensive, with the Averages sort of neutral in the afternoon.
  • There's no change in our expectation of this 'possibly' being a 'B wave' rally in an 'A-B-C' decline, but a setback can hold a higher low (bullishly), and then lead into a late year rally which grudgingly works into early '22.
  • Of course all this is sensitive so won't unfold thusly if COVID insanely runs thru society and we don't get approved EUA for new antiviral pills quickly, not just Pfizer (PFE) and Merck (MRK) (which had setbacks on their HIV medications), but also GlaxoSmithKline (GSK) and Sorrento (SRNE) are all working on antiviral regimens.
  • Geopolitical tensions are ramping beyond the focus on Russia/Ukraine, as that is sort of asymmetrical risk for Putin too, not just for Europe, the reports of the Biden/Putin 'conversation' curiously (not curious) where to the word almost the same as speculation about what they would say (so was there any progress or was the 'real' conversation never reported?).
  • Very wisely Biden (bluffing or not) apparently mentioned that cutting-off Gas (the pipeline) to Germany would backfire on the Russians, not just leverage their position relative to shipping natural gas into Europe.
  • The greater risk might be Iran getting close to having nuclear stockpiles sufficient to make a bomb within the next couple months, hence there's a deal with them or risks with Israel (oddly allied with the Saudi's) get very nervous, perhaps to the point of both of them coordinating taking action.
  • I believed that Biden & Xi calmed things down with China, and while that is debatable as far as 'desirable or not', that's the current condition, most Americans want a fairly hard line on China, but not abandoning trade or a slew of business deals (though we are gradually retrenching those), and a couple companies we track as you know may benefit from a USA focus.
  • Sorrento was among stocks acting well today, and had one new release I was never thinking about, accreditation that enables them to process lab specimens for physicians, hospitals, etc., that accreditation enables billing Medicare and Medicaid, and that's an area that never crossed my mind, (it is not so much a major revenue source, but further legitimizes the firm, after all the bad blood Ji's premature cheer-leading triggered last year).
  • Sorrento's Phase 2 clinical study of RTX for treating knee pain due from osteoarthritis (OA) has begun, with 2 patients injected, the approval of lab accreditation for testing and pathology (will help fund operations while the cancer treatments and so on are developed, COVID efforts are an aside).
  • Ford's (F)  CEO, Jim Farley announced they intend to be #1 in commercial EV's, and that's clearly leveraging the core of their business (we hold it at 12 most recently, near-term target of 18-20 reached, and simply holding).
  • Incidentally Ford has a team trying to figure-out how to double production of the Lightning (F-150 EV), as demand way exceeds supply coming, it's really nice having a stock (it's not the only one) we can comfortably retain without worrying about every squiggle on the chart looking to next year.
  • Speaking of charts, S&P might consolidate a bit, but did achieve goals we set-forth this week to affirm upside, now S&P's fate depends on arresting fears (or actual disease spread, whichever is the case) of COVID-Omicron.
  • I noted 5 more European countries were added to a 'do not travel / fly to' list by the United States, so whether Omicron is dissipating or not (COVID-Delta also seems about the same, but unfortunately people seemingly are almost immune to reacting to huge numbers of people still facing difficult challenges), so sadly every time weighing an outing it should be balanced against risks and environment, depending where it takes any of us.
  • And how that takes the market will have to be measured, those heavily pronouncing us out of the woods are as off-base as those saying it won't ever go away, almost like extremism, it will go and we'll have a good pill.

This market, and a couple stocks, behaved almost like 'awakening a sleeping giant', to coin words of Japan's Admiral when he bemoaned the U.S. carriers not being at Pearl during the attack (only by timing of an exercise were they away, thus the Fleet's core 'carrier strike group' element preserved).

What stocks met that criteria today? Quite a few did, and generally the market stuck it's periscope up a couple days ago tepidly, really in the wake of COVID-driven Omicron panic, which brought back visions of horrid lockdowns and so on. Our view was not that COVID isn't a real concern still, but that psychology was driving the market to extremes, where speculative nibbling was justified.

Now you have pundits either just uncertain (reasonably valid), or concluding a clear end of the pandemic because of the market's comeback. That's carrying it too far, although we can all hope that turns out to be the case. Proclaiming a view of Omicron being like vaccine 2.0 is nonsense! It's a problem, it might be less severe that initial assessments from most of the establishment (except as I noted for the lady doctor in Johannesburg who said her patients were having fairly mild episodes), and the jury is still out on whether or not it going to prove as impotent as far as a virus, as it made most officials trying to deal with it. So (with all due respect to those who try), balanced approaches waiting for data, which should be quantifiable within a few more days, really makes sense.

This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for  more

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.