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Things you need to know 

***Breaking News – PFE announcing that their ‘booster’ shot is enough to neutralize ‘Omi’ – so there is NO need to develop a whole new vaccine….US futures which were down have now gone positive…. ***

  • Stocks continue to push higher into year end, Omicron fears subside
  • Oil up again, US futures up again – Santa is Alive and Well
  • Big Crypto hearing in DC today….what will we learn
  • Feast of the 7 Fishes – #6 Baked/Broiled Salmon

The march continues…. stocks advance, omicron fear subsides, treasury yields rise, Oil continues to advance, the dollar index is holding steady, the VIX – fear index has retreated and Bitcoin & Ethereum (along with a range of others) has calmed down since the drama over the weekend.  The House sent a bill to the Senate to make sure they can raise the debt ceiling – which by the way means nothing for stocks at all…because there is no possibility that the clowns won’t raise the ceiling…all that is, is drama and theatrics.  Do not let that drama sidetrack you.

In the end – what the market is telling you is two things – either inflation IS a risk and if so, all the chatter around a swifter taper and rising rates will deal with that (and that is good) OR inflation is not a risk and if the economy begins due to a swifter taper then the FED will slow down the tapering and interest talk  and that will further support stocks….So, it’s a win win, and stocks move higher….

At the end of the day – the Dow added another 500 pts or 1.4%, the S&P gained 95 pts or 2.1%, the Nasdaq – far and away the biggest winner rose 461 pts or 3%, the Russell added 50 pts or 2.3% and the Transports added 28 pts or 0.2%.

And while that all sounds pretty, I’m a bit more cautious…. My sense is that monetary policy for 2022 will get more aggressive and that will slow the markets advance.  While the FED has done a good job of telegraphing what they are thinking – we know that all that could change quickly.  I mean look how fast the narrative has already changed.  We went from ‘we’re taking it slow, and taper and rates are NOT connected’ – to – ‘we’re doubling the pace of the taper and rates could rise in tandem’ – So, so much for ‘we’ve got it under control…’  Fed Funds futures this morning is now pricing in 3 rate hikes in 2022…. May, July and now November ‘ish’…. recall it was only 3 months ago when the FED told us that we ‘might’ get one hike – and now?  It’s 3…. after 3 is 4!  Capisce?

And again – that does not mean that you need to panic at all, it just means make sure you understand the risks and plan accordingly.  And of course, that also depends on where you are on the ‘risk scale’ and the ‘age scale’.   20 to 50 yr. old’s should be on the right hand side of that scale – all stocks no bonds….50 – 70 yr. old’s need to be a bit more conscious of what their portfolio looks like and move a bit to the left becoming slightly more defensive…and the plus 70 group needs to be moving  a bit MORE to the left  – off the high end of the risk scale as they prepare for their ‘next’ trip.

Again, every sector was in the green…. Tech taking the lead – XLK rising a stunning 3.5% – which makes sense, right? That group has gotten slammed…..the ETF falling 6.5% while individual names fell much more…..So, now if the sense is that the FED is doing the right thing and that the economy is strong enough to withstand a swift taper and two or three rate increases – then there are a lot of companies ‘on sale’…and that was clear yesterday as anything TECH was on fire.  ARKK – which has absolutely gotten slammed – 29% since early November – is now up 13% in 2 days…and likely to go higher as investors reassess the outlook.  I imagine it will hit some resistance at $110/share… (Up another 10% from here).

Consumer Discretionary – XLY also taking the lead – rising 2.3% and that speaks directly to sentiment – right?  Because that sector is about ‘discretionary spending’ not ‘necessary spending’ – necessary spending would be Consumer Staples – XLP and that only rose 0.2% – and to further that point the Retail ETF – XRT also rose by 2.2% – they do go hand in hand (XLY & XRT).  Energy – XLE was strong again rising 2.3% – and that ETF like oil is now up 8.5% since the panic created two weeks ago when they unloaded the Omicron variant on the Friday after Thanksgiving when markets were in an abbreviated session, many participants were away from their desks allowing the algo’s to run wild… And run wild they did – fed by the hysteria created by the MSM (Main St Media), the CDC and Moderna CEO Stephan Bancell – who told us that the current vaccine ‘may not protect us’ and that we will need more (oh, boy – was HE talking his book!)  Moderna stock surged and then it didn’t….and now – Omicron has been moved to the back burner, the back pages of any major legitimate newspaper – because it is not the disaster it was initially made out to be.  And the next mutation will not be either….and the mutation after that….

Financials – XLF gaining 1.8%, Basic Materials – XLB + 1.5%, Real Estate – XLRE +1.7%, Industrials – XLI +1%, even Utilities did better than Consumer Staples – rising 0.8%.  Healthcare XLV gained 1.3%.  The Value trade – SPYV up 1.3% while the Growth trade – SPYG rose by 2.7%.

This morning we are seeing European markets a bit weaker – but with the latest PFE news lets see if that changes the tone…. There is no eco data in Europe today to speak of, but Germany has a new chancellor – we bid farewell to Angie – and wish her continued good health in her ‘twilight’ years.  At 7 am. Markets across the region – remain a bit weaker – by about 0.5% across the board.

US futures which were also weaker as the sun was rising, are now solidly higher…. the Dow up 140 pts, the S&P’s +21, The Nasdaq + 70 pts, and the Russell up 15 pts.  The PFE news is now consuming the headlines…. the original 2 shots plus the booster are enough to ‘neutralize’ the variant….and that is good news….and while it may spread faster (more transmissible) it is NOT more dangerous…. Period.  So, let’s get back to fundamentals.

Eco data today includes Mortgage Apps which rose 2% after last month’s decline of 7.2% and the JOLTS reports…. Job Opening Labor Turnover Survey and that is expected to show 10.4 million jobs available…. but the whisper number is for 10.6…that report hits the tape at 10 am.

10 Yr. treasuries are yielding 1.46% – just a bit weaker – but I would expect that to turn around as the sun move across the sky.
Oil – continues to surge and is now up another 70 cts at $72.70/barrel – this after the PFE news hit the tape.  Why?  Because Omi – will not destroy demand the way the msm led you to believe.  And it’s off – like I said last week to a twitter follower who told me that I was wrong when I told him $80 before $60 – we are now 7 pts away from my target….and $12 pts away from his!

The S&P closed at 4686 and with all the excitement this morning expect us to pierce 4700 again on the opening….So, the  all time high of 4743 once again appears to be within grasp….Amazing really…but remember – the market can remain illogical longer than you can remain solvent…so don’t fight – go with the trend –  but build yourself in some downside protection – especially as we move higher and higher…because – again – we all know how quickly the narrative can change.  Breadth does remain a bit questionable…with more stocks below their 200 dma vs. above…. just sayin’.

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Take Good Care

Chief Market Strategist, Consultant

Feast of the 7 Fishes – #6 Baked/Broiled Salmon

This one is the easiest of them all. You need only a couple of things – Salmon, Old Bay Seasoning, fresh lemon juice.

Get you salmon – skin on – rinse under cold water… pat dry. Place nicely in a baking dish – season with Old Bay and a squirt of fresh lemon juice. Bake on 375 for 10 – 15 mins… Now Turn from bake to broil and broil the tops for a couple of more mins… Careful not to burn. Remove and serve. Simple! No fuss, no mess. And when you are making 7 different dishes and need to put them all out at once – this is one of the simpler ones to get done – and it’s always good.

Buon Appetito.