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Ebbs Lower into Friday Close

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The previously flagged discovery of the new COVID variant in Africa has pressured risk assets in Asia-Pac dealing, leaving the S&P 500 e-mini contract ~0.6% lower on the day. Could the Santa rally/buy the dip mentality be at risk? That probably depends on the scale of restrictions implemented across the globe and any tweaks to the major central bank views if the variant begins to spread more widely and any potential lockdowns/restrictions become more entrenched, although any delay of a reduction in central bank stimulus would of course provide additional liquidity vs. current expectations i.e. a cushion for equities.

  • While the unrelenting march higher in U.S. equities has been in play since the central banks turned on the support taps back in March '20, our technical analyst notes that attention remains on Monday's reversal lower, whereby the contract registered a bearish shooting star candle. Initial support is seen at Tuesday's low (4,649.00), with a break through the Nov 10 low (4,625.25) required to confirm the technical top. Bulls need to force a fresh all-time high, which would negate the signal and confirm the resumption of the uptrend.