Markets ushered into a strong recovery on Monday on a backdrop of more positive news on the effects of the Omicron variant of Covid-19. It appears that after the initial knee-jerked reaction, investors are heartened with the mild symptoms reported globally.
As we reviewed the scenario, we believed there are reasons for optimism.
1: Friday was a poor liquidity day
Indeed, when the stunning news dropped its bomb on investors, the market was trading in a shortened session. While selling pressure is high, there are few buyers since many would have gone for Thanksgiving weekend.
For example, the number of shares that changed hand for SPY ETF was 59 million, much lesser than the 70 million seen in previous days. It is also much lower than the 150 million peaks we visited in the second half of the year.
2: Poor reflection of Demand
As low volume persists through the trading session, it becomes a poor indicator that demands for shares will be weak in the days ahead. Moreover, since many market participants were not in the market, their absence means a more considerable discount on the news.
3: Monday, a strong comeback
Indeed, we have seen firm buying action on Monday given the good news from the weak nature of the variant based on the assessment of patients. This helped to push Nasdaq up by 2% while the Dow climbed by 0.9%. While S&P 500 rose by 1.5%. It reflects the confidence in the market, consistent with our weekend update. Given that Moderna is confident to roll out its improvised vaccine by early 2022, there is plenty of good news baked in the market on Monday.
And with that, it is hopeful that the economy keeps growing.
We hope you enjoy this read.
Cheers,
Pika Nat.
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