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The Bulls Extend Their Edge


Global equity markets overnight were all higher with gains generally reaching 0.5%. The daily US infection rate for Sunday was 164,644 cases. Apparently, Australia hit a new daily infection record for the pandemic and similar infection count flares are being seen around the globe. Earnings announcements will include Cal-Maine Foods after the Wall Street close.

S&P 500: With another new record high to start early this morning the equity markets continue to discount the surging daily US infection count with some traders suggesting the ongoing surge in omicron infections in effect pushes back Fed tightening timing. At least to start today, the March S&P contract appears to have run into temporary psychological even number resistance of 4800.00.

The Dow futures have also managed to gain despite renewed weakness in travel related shares perhaps because of headlines suggesting the omicron infection wave in Europe is moderating. If the noted infection surge in Europe is indeed abating that gives credence to the argument that omicron is producing less severe medical outcomes than Delta.

The NASDAQ has not forged record highs yet but appears to be on track to usurp contract highs up at 16,768.50. Limiting the market on the upside is news that Apple close New York City stores due to surging infections.


DOLLAR: The dollar index appears to be poised to forge a 3rd straight day of tight sideways consolidation. However, we think the dollar is poised to breakout to the downside as European infections fall while US infections post daily records. From a different perspective seeing US infections surge is being deemed as unimportant as Europe has shown the omicron infection surge can be reversed sooner than some experts expected.

EURO: Like the dollar index, the euro has consolidated sideways as if poised to make a key trend decision ahead. As indicated already omicron infection patterns in the euro zone are showing signs of moderating and that could eventually inspire longer-term speculative buying of the euro and other recovery currencies.

YEN: With equities surging off market expectations of a short-lived omicron infection surge and some expectations that the pandemic is set to end because of less lethal versions of the original virus, more flight to quality long liquidation in the Yen is likely. Overnight, Japanese economic data was mixed, with jobs related news disappointing and offset by better-than-expected Japanese industrial production readings.

SWISS: The Swiss has broken out to the upside and extends its bullish resiliency to forth session, and we expect the currency to continue to grind toward its 200-day moving average up at 1.0961. Perhaps the Swiss sees positive potentials from headlines touting a softening of the euro zone daily infection count.

POUND: Like the Swiss, the Pound has extended its bullish resiliency into another session with a higher high and the highest exchange rate trade since November 22nd. The bull camp might be emboldened by reports the British government will not impose fresh restrictions before the end of the year.

CANADIAN DOLLAR: Like the Swiss and Pound, the Canadian is displaying action that targets additional upside. Downtrend channel resistance would be violated on the upside with the trade today above 78.42.


We are not sure if Treasury bonds have lost their bullish resiliency or if the trade is simply thinned because of the holidays and or because of a thin schedule of economic reports. However, Bond prices did fail to rally off a much softer than expected Dallas Fed manufacturing release yesterday morning and shorter term US Treasury yields yesterday posted the highest yields in nearly two years. On the other hand, looming house price readings will be released today from the national home price report and from a private Case-Shiller Home Price report and that could exert some downward pressure on both bonds and Notes.

Apparently, Omicron fears are falling in the Euro zone while US infections are surging (164,644 on weekend holiday Sunday) and might be expected to post further record daily infections because of close holiday contact among family and friends. While the net spec and fund long in treasuries is small from an absolute perspective, the recent net long is the largest net long since February 2020 which we equate to overly zealous bullish sentiment.

The December 21st Commitments of Traders report showed Bonds Non-Commercial & Non-Reportable traders were net long 2,276 contracts after decreasing their long position by 10,804 contracts. The net spec and fund “short” in notes is probably understated given the slide in prices since the COT report was measured and therefore the net spec and fund short is probably at the largest levels since October 2018.

For T-Notes Non-Commercial & Non-Reportable traders added 41,547 contracts to their already short position and are now net short 502,625. The North American session will start out with a weekly private survey of same-store sales that will reflect last-minute holiday shopping. The October FHFA housing price index is expected to have a modest uptick from September’s 0.9% reading. The October Case-Shiller home price index is forecast to have a mild downtick from September’s 19.1% year-over-year rate. The Richmond Fed’s December manufacturing index is expected to have a moderate downtick from November’s 11.0 reading

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