Last Friday the DOW led the market gap down and lost 2.53% due to the new COVID variant Omicron emerging in South Africa. The market is afraid of a new worldwide lock-down that will damage the economy. Did the market act like shoot first and ask questions later? Is the new variant Omicron really that bad?
Apparently, the market didn’t know enough to make a clear statement on Friday. The correction in the DOW stopped at a critical level at 34,742, a prior important high made in early May. The DOW topped on November 5th, and it has been selling for the last 14 trading days. The DOW is due for a rebound based on the daily chart since it has met a support after an extended selloff for 14 trading days.
Hopefully the market sentiment changes on Monday and turns its attention to Black Friday and cyber Monday shopping news. And perhaps they will release more medical information about the new Omicron variant. From what it has been reported so far, Omicron variant appears to cause only mild symptoms to healthy people, the elderly and people with pre-existing medical conditions are more at risk.
We observed some strong stocks that refused to make a low on Friday. The divergence between these stronger stocks and the indices gives another reason that the short bottom could be within 1-2 days. If the market continues the selloff on Monday, then most likely the Santa Claus rally is in danger.
The market could go down from here to make a bottom in Q1 2022 if the Santa Claus rally is destroyed by Omicron.
Either way, the market is very close to a top. It is a question whether this top will be now or January 2022. Be careful with the positions. And don’t add new money to work at this location.
Matterport (ticker MTTR) is a metaverse growth stock. We are trading this stock because it has relative strong performance. When the market rebounds, MTTR will rebound stronger. So it is Okay to trade this one, but you have to be flexible, ready to get out when the market tops
Below is the DOW daily chart. You can see the daily oscillators have turned up already even though the price made a new low. That’s a bullish divergence on daily chart.