Overview
The key low made last week held through extreme volatility this week.
The jobs report was robust (+467,000), with ~151K jobs created just in the Leisure and Hospitality sector (perhaps the sector hit hardest in the early days of the pandemic).
European nations, such as Denmark and Switzerland, are relaxing Covid restrictions, and the US will eventually do so as well, perhaps starting at the local level.
Key Question
Is it time to look past Covid-19 and think about the reopening trade again?
Performance Summary
Despite extreme volatility in individual stocks (driven by earnings news), the markets had a positive week. The Nasdaq Composite, represented by ONEQ below, had a much-needed respite. Even small-cap stocks bounced nicely this week. Technically, it is significant that the key indexes remained well above last week’s key low.
Based on leveraged and inverse index ETFs, the sensitive net bull-bear balance ended the week below -50, after having turned up briefly mid-week. I see this as a sign that some of the selling pressure is abating.
The market is going through the usual bottoming process, and so long as we stay above the key low from last Monday, we have to assume that this is a base-building period.
First, the retracement from last week’s bottom was just about the expected 62% or so of the January decline, using the Fibonacci retracement logic favored by traders.
This week, the weakening in response to the massive drop in Meta (formerly Facebook) stock has also been consistent with the Fibonacci retracement amplitudes. Indeed, the SPX could drop down to the 4360 area without upsetting the recovery.
Indeed, my counter-trend model is now long the S&P-500 index, with a stop at the key low from last week.
The Reopening Trade
Here we mean a world pushing past Omicron and returning to dining, travel, and a return to the office, perhaps treating Covid-19 as just another viral infection. What would this mean for different sectors of the economy?
The key sectors here would be finance, travel and leisure, industrials, and energy. The value vs. growth pendulum will probably swing towards value, and small caps might get a bid.
Here are a few ETFs to follow:
You can follow individual stocks, such as for airlines (DAL, UAL, LUV), cruise lines (CCL, NCLH, RCL), car manufacturers (F, GM, TSLA), or hotels (MAR, HLT, H, IHZ) and so on. Then there are the many stocks in the Energy sector, starting with XLE and the benchmark energy sector ETF.
For reference, the top ETFs in our ETF Finder table are energy-related.
Wrap-up
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Thank you for spending some time with me.
Disclaimer
And now for some housekeeping. This publication is for “edutainment,” education, information, and entertainment purposes only. It is not to be construed as investment advice. Past performance is not necessarily indicative of future results. Our disclaimer at chandeindicators.com is included herein by reference.