Tense Again: New COVID Variant Causes Worst Market Sale in 70 Years


As we pointed out last weekend that “” the bad smell erupted in the form of a sharp drop in global markets due to the emergence of a particularly virulent new strain of COVID. In fact, it was the worst post Thanksgiving sale in 70 years for US markets.

IWM daily chart

IWM daily chart

Considering that the markets have at least a short-term memory, a new weakness seems to be looming at least until our sentiment and our market internals are twisted to the downside or something emerges that shows the new tension is. under control one way or another.

Other than that, traditional market statistics regarding the strength of the year, especially when markets are already strong, might be the exception this time around. Most worrying is the failure of small caps () which clearly failed a recent breakout after erasing more than 6 months of side action.

Risk activated / bullish

  • Risk indicators are still neutral on the SPDR® S&P 500 (NYSE 🙂 despite the massive sell off
  • The () did not leave a downward gap and its uptrend remains intact on the weekly charts
  • Value stocks via Vanguard Value Index Fund ETF Shares (NYSE 🙂 underperformed Growth stocks – Vanguard Growth Index Fund ETF Shares (NYSE 🙂 even during the sharp decline
  • Semiconductors (), one of the most speculative sectors in the market, continues to outperform SPY and has the highest TSI score in the modern family
  • IWM is approaching oversold levels and could be ready for a rebound shortly

Neutral metrics

  • () fell below key moving averages, while maintaining positive momentum according to Real Motion
  • The volume analysis appears relatively neutral with the exception of the IWM, although the purity of the volume reports that it is a bit skewed due to the shortened holiday week.

Risk disabled / Bearish

  • All major indices fell sharply, between -1.8% and -4.5%, with the worst being IWM with a close below its 200-day moving average (DMA)
  • Market insiders on SPY and QQQ, which were already weak, have weakened further and are still not at the extreme oversold levels we’ve seen in recent years.
  • IWM volume shows strong institutional sales over the past 2 weeks
  • All major market sectors ended the week lower, with consumer staples () and utilities () the least declining, showing that risk-free prevails
  • Hindenburg Omen indicator now shows 18 market portents, the highest number since the initial pandemic market crash in early 2020
  • SPY recorded nearly 350 new 52-week lows in underlying stocks, while posting virtually no new highs
  • Sentiment readings were bearish overall, with () up over 23% on Friday alone, while the cash index () was up over 54%
  • The number of stocks above the key moving averages has all deteriorated, especially on the 10-day moving average
  • Volatility (VXX) broke higher, knocking out critical levels we highlighted last week
  • Long bonds () have approached the top of their recent trading range on the flight to safety, and are now experiencing levels of overbought on both price and momentum according to our Real Motion indicator.
  • Foreign stocks were rocked, especially emerging markets () which are now in a bearish phase, hitting new lows for the year and securing a TSI score of -3.3
  • () crashed hard, but seems to hopefully maintain support at its MM 200

Crypto highlights

  • Cryptocurrencies did not resist the global sell off this week, with (BTC) down more than 7% on the week and maintaining support at $ 53,750 for the first time since October
  • A handful of coins in the Metaverse and Blockchain Gaming industries have made insane gains despite the market downturn, with (MANA) + 21%, (SAND) + 57% and (GALA) + 81%
  • (CRO) continues its momentum growing 42% more over the week as the platform becomes more mainstream
  • Decentralized finance coins were beaten across the board, with several double-digit losses for the biggest players such as (ETH) -6%, (SOL) -8.3%, (ADA) -17.5 % and (DOT) -13.6%
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