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“The ability to concentrate and to use time well is everything.” – Lee Iacocca

Markets are looking to recover a chunk of Friday’s losses in early trading this morning.  Equity futures are up across the board, but the Nasdaq is leading the way higher erasing about 40% of Friday’s losses.  Crude oil is also bouncing back above $70 with a gain of over 5%, copper is up 1.5%, and the yield on the 10-year US Treasury is up 6 basis points (bps) to 1.54%. In crypto, bitcoin is trading just below $57K gaining nearly 4% while Ethereum is trading just above $4,300.

Investors are trying to make sense of the latest Omicron Covid strain, but at this point more seems to be unknown than known.  Clouding things even more, we’re unlikely to have definitive answers in the immediate future.  Early reports have suggested that symptoms from this latest strain have been mild and that vaccines are still likely to provide good protection from severe illness, but that it is also more transmissible.  While demographics may be a factor behind the mild symptoms (younger population in South Africa), if that did turn out to be the case overall, it would certainly be a positive.  Even if the best-case scenario does play out and Friday’s panic proves to be a massive over-reaction by markets and governments around the world, the short-term impact of restrictions on activity and international travel around the world will have some economic impact.  Just last night, Japan announced that it will ban the entry of foreign travelers joining Israel, which made the same announcement last week.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

Whether you’re looking at small caps or large-cap equities, it’s a tale of two markets this week.  In the small-cap space, the Russell 2000’s break out earlier this month looks increasingly like a fakeout, and rather than a new leg higher, the question for small-caps is whether they can hold support at the uptrend line from the summer lows and not break down.  For large caps, the S&P 500 still remains well above its breakout level from the summer high before September’s sell-off.  Support for the S&P 500 doesn’t come into play until the 50-day moving average which is just above the 4,500 on the index and $450 for SPY.

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