November 29, 2021
Good morning,
I am not a conspiracy theorist, nor do I believe in coincidences, so that leaves me with just a hint of suspicion that somebody made a lot of money Friday. However, none of that matters, what is relevant now is that Friday’s carnage was about two simple factors; the emergence of a new Covid variant and poor market liquidity following the Thanksgiving holiday.
In ordinary circumstances, sharp moves like the ones we saw on Friday, often reverse fairly quickly. The initial impulse when an unexpected catalyst hits the news wire is to reduce risk, and when price action tells you that was the right initial call, you reduce more of it. However, it is often the case that the ultimate reaction ends up being substantially greater than the underlying catalyst warrants…hence the reversal.
We are getting a modest reversal this morning. Futures have been more or less pinned to +.86% after losing 2.27% on Friday. In the days ahead, I suspect a little more of Friday’s losses to be made up as details of the new variant become known – remember, “unknown” to “known” is a market driver all things being equal.
See you Wednesday.
Be well,
Mike