US Close: Stocks roar as Omicron fears ease, Oil rallies, Nat Gas tumbles, Gold struggles, Bitcoin crash aftermath

US stocks are quickly getting their groove back as Omicron worries ease as the early COVID data shows cases remain mild in nature.  Even on a day when a cruise ship reports at least 17 passengers tested positive for COVID, cruise ship stocks are soaring higher.  The US economy with the help of rising vaccination totals will continue to reopen as people learn to live with the COVID.  

Oil

Crude prices rallied on easing fears over the Omicron variant, a surprise RRR cut from China boosted risk appetite, and on foreign demand for the US strategic oil sale. It appears the major oil price selloff is over as the mid-$60s has provided strong support and has been accompanied with a steady reminder that the oil market will remain vulnerable to some shortfalls over the next couple of years. COVID and the ESG movement has accelerated that lack of investment in new wells and that should keep oil prices from dropping below the $60 level going forward.

Earlier crude prices were boosted on optimism that demand must be improving since Saudi Arabia raised prices. Over the weekend, crude was not dragged down after reports that a Norwegian cruise ship had a COVID outbreak with at least 17 cases. The entire cruise line industry was battered when COVID first arrived, but optimism is growing that due the vaccine requirements we are getting closer to learning how to live with the virus. Shares of Royal Caribbean and Norwegian Cruise Line are higher by at least 9%, prompting optimism that large parts of the economy will not need to shutdown over this next wave given that over 70% of the population is vaccinated. 

WTI crude tested the $70 level and the 200-day SMA but has pared some of its gains. Crude’s next big move might be dictated by the dollar and might not have a clear trajectory until Friday’s inflation report. 

Natural Gas

Warm weather is sending natural gas prices sharply lower. I quickly had to go back to the house after quickly mistakenly having my toddlers put on their winter coats this morning. The supply situation across Europe and Asia has the natural gas markets very vulnerable to higher prices, but the short-term demand outlook is not warranting anything but softer prices.  Natural gas should find some support well ahead of the $3 handle. 

Gold

Gold prices are struggling as demand for safe-havens ease as early data suggest Omicron cases remain mild in nature. Gold was unable to muster up much of a rally after the PBOC cut the cash reserve requirement ratio as their debt-loaded property market continued its downward spiral.

Gold will face its true test later this week when a hot inflation report could seal the deal for an aggressively faster taper by the Fed. Treasury yields got their momentum back as optimism grows the Omicron variant won’t lead to widespread lockdowns as early data suggests cases remain mild in nature. 

Gold may consolidate between the $1750 and $1800 trading range.

Bitcoin

Too often I write about unexpected Bitcoin price plunges, but that seems to be the norm. Confidence that the crypto selling pressure is over is far from over and that is why there are some fading the Saturday rebound. This unexpected crypto crash does not mean the end of Bitcoin or bursting of what some call the biggest bubble ever. Excessive margin trading and a complacently bullish market is the culprit that let Bitcoin end up being vulnerable to what was almost a 40% drop from the record high of just a month ago. 

The entire crypto space is evolving and the focus for some is shifting from the good old store of value trade to which coin will be best for defi, the metaverse, or even NFTs.   

Ethereum is becoming the favorite holding for many crypto investors and that could gain momentum in the New Year. 

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