We’re starting Monday with a calmer view on the omicron variant and the most important stock market charts to watch the week of Nov. 29.
Many drunk traders woke up on Thanksgiving with late-night news of a new coronavirus variant out of Africa — and it shook the global market with a big sell-off on Friday.
However, the news is preliminary and not informative. For example, we don’t know if the new strain is necessarily more lethal, just that it is “very different.” In fact, the initial word coming out of South Africa is that the effects are actually milder.
This could end up being just another fear-induced buying opportunity for the markets to go higher by the end of the year.
The market, however, should continue to be volatile heading into 2022, and this elevated volume could create opportunities! Opportunities that my Round Trip Trading Club strategy is keyed in to exploit — click here to learn more.
News of a modified vaccine that should soon be available is also calming everyone. Unfortunately, this is our reality now, and it’s more important than ever to have a tight portfolio size and risk size in positions.
The real risk of omicron isn’t greater than what we’ve seen with the other variants. However, I do expect bad leadership to stoke fears, induce lockdowns and make the situation worse over the course of this winter.
I expect more negative headline shocks — mainly based on lockdowns out of Europe — and perhaps more restrictions in places like New York City.
I also expect the markets to rally hard into the year-end, starting December on fire — unless, of course, there’s more negative headlines out of the White House or panic lockdowns begin again…
Stock Market Charts to Watch the Week of Nov. 29 on Top of Omicron Variant News
If anything, the variant would be a good reason to believe the Federal Reserve will slow tapering down, sending stocks higher.
The stock market should calm down next week as more information rolls out. But right now, the markets are acting like the world will go back into full lockdown — even with the vaccine.
So in the meantime, there are some important stock market charts to watch the week of Nov. 29.
When you look at the 10-Year Bond Yield (USGG10YR), you’ll see that the yields collapsed when the COVID-19 news hit the market — as the prospect of slower tapering came in.
I’m looking for yields to stay steady in a range between 1.42% and 1.65%, which would be calming for stocks.
We don’t need a full collapse in yields or interest rates to explode higher again…
The CBOE Volatility Index (VIX) also spiked and gapped higher — back into the mid-20s.
When we look back at this year’s previous spikes — except for January — it always remained under 30 — 20 is considered normal volatility of 1% moves up or down any given day. And the higher above 20 the VIX is, the more volatile the market.
I expect this bout of fear to remain the same, and a move above 30 would suggest we test 34-40.
While I’m looking at the VIX, I’m also keeping an eye on the nonfarm payrolls report for November coming out on Friday.
With the omicron variant news trumping inflation worries — at least for the time being — we still have to remember the plot! The real risk to stocks continuing higher is the end of easy money.
Federal Reserve Chair Jerome Powell has alluded to full employment as his core reason to continue buying bonds. However, a big beat on jobs data would likely mean a quicker tapering of those bond purchases….
Let me know your thoughts on what to look out for on the stock market charts to watch the week of Nov. 29
And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
