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Monday snapback rally on Wall Street. Plus, Goldman Sachs on Omicron

Written By | Nov 30, 2021
Omicron, Monday snapback rally, Goldman Sachs

Vix volatility chart, Monday, 3 p.m. ET 11/29/2021. Courtesy

WASHINGTON – After a harrowing half-day of big time bearish action last Friday, traders and investors continue to enjoy a partial recovery of their substantial holiday week losses. The impressive Monday snapback rally, which we predicted, remains underway an hour before today’s closing bell. (Check out our lengthy weekend recap for more details.) Some reasonable info from Goldman Sachs, re: the potential market effects of the (currently) dreaded Omicron Covid variant also helped calm investors’ high blood pressure readers.

The VIX chart still looks ominous, despite the Monday snapback rally

On the other hand, at Tuesday’s market open, the Halloween boogeyman seems intent on making an out-of-season return. The Monday snapback rally may already be in jeopardy.

As our headline chart above indicates, as of 3 p.m. ET Monday, the VIX volatility indicator, which almost broke through the top of its chart Friday, seems intent on calming down just a bit. Will reason return to Wall Street? Well, maybe a little bit.

At least for now.

Like a poltergeist, Covid is ba-a-a-ack…

As we noted Friday, after the government-media complex’s terroristic Covid disaster warnings achieved their desired effect late last week,

“…we’re looking at a positive market snapback Monday or Tuesday latest. After that, who knows. But Friday’s action was actually an example of an absurd overreaction, one led, as usual, by blood-in-the-streets reporting of another new and obviously more terrible iteration of the Wuhan Flu. (And there will be many more. Trust us on this.)

“The ensuing selling panic proved way overdone due to the lack of volume on a shortened trading day. The absurd drop in oil prices offered ample evidence of this, given our still-ongoing supply shortage of fossil fuels.

“No increased supply means continuing high – or higher – prices. Of that we can be sure. So the crude oil crash, and the associated crash in oil and gas related stocks, should reverse in short order. Meanwhile, other massacred sectors will attempt to recover as well.

“Could we be wrong? Sure. But extreme nonsense like Friday doesn’t generally persist for long. So we’ll go with the bulls early next week unless something tangible and convincing leads us to change our thinking on this.”

Problem is, we never can tell when the latest “mandates” and erroneous “science” will erupt in official Washington next. When a government busies itself trying to cancel its opponents out of existence while firing the country’s existing electorate, one finds it difficult to predict its next irrational move.

Mr Market rallies. But is this one real, or is it Memorex?

That said, Mr Market always tries to guess the ultimate outcome of such imponderables. Today, he seems to tell us that the latest overblown Covid variant panic has sent the usual suspects way over the top. Because, Monday snapback rally. So, don’t believe them. Just ignore those idiots behind the curtain. But keep your finger on the “Sell” trigger, just in case Monday’s snapback was a mirage.

Budget battle returns

Actually, what investors should worry about this week is the next upcoming Capitol Hill budget battle. (Like Covid, it’s ba-a-a-ack!) That annual bit of partisan idiocy comes to fruition late this week as an out-of-control Democrat-led Congress (again) risks dithering the country toward disaster. Stay tuned for the big drama ahead. Watch America’s socialist party try to cram in more counterproductive overspending by adding amendments and Christmas tree goodies for its wealthy supporters as a condition for ensuring the Federal government doesn’t default on its now epic debts.

And remember: Cocaine Mitch & Co., who (controversially) helped the Democrats out of Budget Mess Chapter 1 a couple of months ago said the GOP wouldn’t cooperate with them this time around. So real tension continues to mount.

On the other hand, the Senate’s Three Worst RINOs of the Apocalypse – Collins, Murkowski and Pierre Delecto – might go off the reservation again and help Schumer and his fellow commies progressives stave off defeat and default.

As usual, don’t miss the next thrilling episode. Even a hint of economic danger, which we’re sure to get, might quickly knock the legs out from under today’s nice rally, albeit later in the week. So stay tuned.

Covid Omicron variant… the latest chapter in the Davos-Great Reset Saga? Goldman Sachs weighs in.

But back to Covid. The respected robber baron analysts of Goldman Sachs (NYSE: GS) weighed in Monday with their opinion on all this. Potential Goldman scenarios range from disaster to not much more than a whimper, given that Covid’s shock value continues to diminish among the growing mob of low-class voters (all of us) that’s getting sick of all the fake drama coming at us from the Feds. Under the “leadership,” of course, of Resident Biden.

The Twin Tylers of ZeroHedge sum up the Goldman Sachs market take rather nicely, as you can see in our excerpts below. Goldman’s analyst gurus figure we’ll soon face one of the following Omicron-inspired investing scenarios.

“1. Downside scenario: Omicron transmits more quickly than Delta, and evades immunity from vaccines and prior infections. In this case, Omicron unseats Delta as the dominant strainas well as “evades immunity against hospitalizations only slightly more than Delta, and causes similarly severe disease.” As far as economic impact, it would result in another large Q1 infection wave across various economies, resulting in a global growth slowdown to a 2% q/q annual rate – 2.5pp below Goldman’s current forecast.

“2. ‘Severe downside’ scenario: This less likely scenario would see both disease severity and immunity against hospitalizations substantially worse than with Delta, and would have a worse economic impact than the 1st scenario. The economic impact would of course be worse, while “The net overall inflation impact is again ambiguous although the moves in energy and services inflation(down) and in goods inflation (up) are larger.”

“3. False alarm scenario: Omicron is a nothingburger – and spreads more slowly than Delta. It has no significant effects on global growth and inflation.

“In this scenario, the sharp rise in reported Omicron cases in Gauteng [South Africa] may reflect skewed sequencing, other data issues, or superspreading events. Finally, any ability of Omicron to outcompete Delta in South Africa does not necessarily carry over to other geographies with higher vaccination/lower prior infection rates

“4. Upside scenario: Here, Omicron is slightly more transmissible than Delta but causes much less severe disease. This speculative ‘normalization’ scenario would result in a net reduction in disease burden on various systems, leaving growth higher than in Goldman’s baseline. In this scenario, inflation is likely to decline more quickly than the baseline scenario because of a rebalancing of demand from goods to services, along with an accelerated recovery in goods and labor supply.

“In Conclusion, Goldman notes that Omicron ‘could have sizable growth effects,’ however the range of medical and economic outcomes remains unusually wide. Because of this, ‘we are not making Omicron-related changes to our growth, inflation, and monetary policy forecasts until the likelihood of these scenarios has become somewhat clearer.’”

In other words, Goldman isn’t too worried about adverse effects from the latest in what’s sure to be an endless parade of Covid variant panics in our opinion. But Goldman also hedges its bets. The media hype on Omicron has only just begun and no one knows how this narrative will play out.

The Deep State is messing with us again. Investors beware.

These well-timed panics will be incited by WHO, the CDC, Resident Biden and the Biden Junta and the Davos Gang. Each variant will show up at precisely the right time to damage or kill more small businesses. Portfolios and middle-class lives, ruined holidays, and recession may follow.

For those investors who remain nervous, lightening up a bit on interest sensitive investments could be useful. Selling off shares of one or two poorly performing investments (year-end tax-loss selling) and raising a bit of cash can prove a good maneuver. Going back to holding cash might be one way to cushion any Federal year-end nonsense. And that includes that asinine budget battle that’s almost sure to surface soon. (Because it has to.)

Picking up a bit of gold and silver via ETF iShares purchases (NYSE: IAU and NYSE: SLV) could prove a good inflation hedge here. Even though the current Omicron freakout has driven this story off the financial front pages for the moment.

If nothing bad happens soon, we might extend that Monday snapback rally into a rip-roarin’ year-end Santa Claus Rally. Despite Tuesday’s ominous opening trades.

So, to mix metaphors, we won’t start counting our chickens just yet. The worst may be yet to come.


Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17