Weekly Market Review & Analysis For November 22, 2021

The market hectic four-day trading week ended on a risk-off stance due to reports of the heavily-mutated coronavirus strain - Omicron. The S&P 500 that hit the record for highest during the week fell 2.2% over the week. Its Nasdaq Composite tumbled 3.5%, and the Dow Jones Industrial Average plunged 2.0%, while the small-cap Russell 2000 index sank 4.2%. 

Ten of the eleven S&P 500 market sectors finished lower, with the most considerable losses coming from consumer discretionary with -3.6%, communication services with -3.3%, and information technology with -3.2%, which saw losses exceeding three percentage. The energy industry with +1.7% gained a healthy increase, even though it dropped 4% on the day.

Before the variant news on Friday market witnessed a rotation trend towards value stocks rather than growth stocks, as investors were preparing for the Fed to tighten its policy. These expectations were bolstered with the following events:

  • Jerome Powell has been selected for a second term as Fed Chair, and Lael Brainard to be vice-chair of the Board of Governors.
  • Weekly initial claims of 199,000 dropped to their lowest levels since November 15 in 1969, and the Fed's favored inflation gauge, the PCE Price Index, was up 5% year to year in October.
  • The FOMC Minutes of the meeting in November directly confirmed these expectations.
  • The yield for the Two-year bond rose by 13 bps over three days.

The entire world market was thrown into turmoil on Friday following the announcement of Omicron. Fear of risk permeated markets around the globe: Stocks across Europe, Asia, and the U.S. settled sharply lower, U.S. Treasury yields dropped abruptly, West Texas Intermediate (WTI) crude oil futures fell by 12% and posted minus 9% over the week's session. The CBOE Volatility Index rose sharply above 50%.

In addition, according to The CME FedWatch Tool, rate hikes expectations were hardened. The likelihood of the rate to rise in May 2022 was reduced on Wednesday to 36.4% from 55.3%, and the chance of an interest rate hike in June 2022 fell to 61.8% compared to 82.1%.

The yield on the Two-Year bond dropped twelve basis points, posting 0.52% before the closing of the bond market at 14:00 on Friday. The Ten-Year yield fell by 16 basis points, to close at 1.49% after trading against 1.7% in the early Wednesday session.

Separately from that, The U.S. confirmed plans to release 50 million barrels of crude oil from the SPR (Strategic Petroleum Reserve) over several months. The United Kingdom, India, Japan, South Korea, and China will draw oil from their reserves.

Overseas market

European market(s) were down broadly: The United Kingdom FTSE 100 Index fell 3.6%. The German DAX Index decreased 4.2%, France's CAC-40 Index sank 4.8%, The Italian FTSE MIB Index declined 4.6%, the Spanish IBEX 35 Index tumbled 5%, and the Swiss Market Index fell 2.0% lower.

Policy on fiscal matters in the United Kingdom and Europe is likely to boost economic growth. At the same time, central banks were slow to stop their loose monetary policies, and the pressures on inflation and supply are likely to ease soon.

Stock markets across Asia declined broadly also: Japan's Nikkei Index dropped 2.5% while the yen rose later in the day. China's Shanghai Composite Index faded 0.6%, as did the H.K. Hang Seng Index, which fell 2.7%. The South Korean Kospi Index traded 1.5% lower on the session, following the news of yesterday's rate hike from the Bank of Korea. In India, the S&P BSE Sensex 30 Index plunged 2.9%, while the S&P/ASX 200 Index in Australia declined 1.7%.

In news of economics, Tokyo consumer price inflation increased this month, and Hong Kong's October exports increased more than was expected. In addition, the heightened virus variations are occurring as markets continue to grapple with supply chain challenges and inflation pressures.

The world economy could be nearer to the conclusion of supply chain issues than the start. The market tends to see six to twelve months into the future. It may soon start to think about the possibility that specific shortages could begin to ease while supply overflows could develop in the second quarter of the year.

Precious metals

Thanksgiving was a holiday that was a canny market play in the bullion banks' favor. The turnover on the Comex exchange was high due to an organized bear attack that forced the removal of long stops and slashed opening interest to 64,110 contracts from Wednesday's session record high.

The silver and gold markets have had a rough week, as bullion banks pushed gold to below $1,800, to push as much as possible futures bulls to close their trades and make the most December call options expire as worthless. Gold dropped by a net $54 since last Friday's closing price, to $1,791, while silver fell $1.49, finishing at $23.11.

It's becoming more apparent that the leading central banks are facing an issue with inflation that's not disappearing. In the last two weeks, most of Europe has been back in lockdowns and restrictions. The result is rising costs and a continuing economic downturn, at the very least, in Europe. Based on what is seen in Europe, it'll be big money across the German, Switzerland market and elsewhere - It is selling euros to stockpile any available bullion gold.

Euro Dollar

The Euro Dollar initially declined during the development of the week's trading session, only having seen such an explosive move on the final day of the week. However, this should not be a surprise to many of you, as this was a market that has completed our Inner Currency Dip 1.120 and that was oversold and ready to pop higher.

When you view this price chart, you can observe that we had substantial completion, so it makes sense to experience a strong bounce eventually. Consequently, we may make a healthy run towards Mean Res 1.137 and possibly even the 1.145 level.

Cryptocurrencies

 If you've been looking at the charts on Friday, you'd probably already seen the Black Friday sale! However, there is a strange sense of déjà vu infiltrating cryptocurrency market(s) as Black Friday delivers a unique buying happening right on cue, just like in 2020.

  • Bitcoin is down 8%
  • Ethereum is down 9.6%
  • Ripple is down 10.5%
  • Litecoin is down 15%

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