This past "Recovery Day" was anything but - stocks took an absolute pounding on Friday as news broke of a new "omicron" coronavirus variant loose in the world. The Dow dropped more than 900 points, and the big S&P 500 index lost more than 2.3% at one point.
The energy sector was even worse. The Energy Select SPDR Fund (NYSEArca: XLE) tanked more than 6% on Friday. Investors were clearly imagining omicron would torpedo demand for oil and gas, just like the "O.G." coronavirus did back in March and April 2020.
I think that's a tad dramatic. First of all, we don't really know much about omicron yet. We know it's got some potentially scary mutations, but that's about it. Over the next few weeks, scientific consensus will emerge, but the business case for an overall bullish market is still strong.
See, sell-offs like we saw this past Friday are kind of like a feather blowing around in a tornado. Volume was very light - as it always is the day after Thanksgiving - and the trading day was short. The overall economy was no different on Friday than it was on Wednesday. Markets just don't bottom on Fridays, and all the ingredients were there for the bullish trend to resume.
And as if on cue, a fast, convincing rally ignited yesterday morning; by 10:30 a.m. or so, the S&P 500 had already made back half of what it lost on Friday.
Energy is leading the way - the sector should erase those 6% losses over the next day or two. I've charted an energy penny stock that could do as much as 10 times better than that...