Pfizer announced the preliminary results of a study showing its Covid-19 vaccine has shown to be at least 90% effective. Simply put, this is a game changer: the first definitive signs that the pandemic which has killed 1.2 million worldwide can be controlled.

S&P 500 futures are currently up 157 points to new all-time highs.Note that ES reached the target of the IH&S pattern established and then consigned to the dust heap in late October. The first order of business is to determine whether these prices can hold.

continued for members…VIX has no immediate limits to the level to which it can fall now that the channel has officially broken down. Remember that it never quite reached the .886 at 19.86.

USDJPY has rallied sharply, though it has yet to break above the falling red TL – perhaps a sign of the limits to which it will bounce. …as is EURUSD, which has reached the top of the little white flag pattern established over the past few months.Keep in mind that DXY never reached its support levels, so I expect USDJPY will take up the slack with a reversal of its latest rally. As we discussed last week, GC and especially SI were vulnerable to a reversal  – and they’re doing just that this morning – even though DXY isn’t rallying at all. DXY’s failure to rally is especially interesting given that the 10Y has spiked to new cycle highs.This is problematic for a number of reasons, chief among them that the 2s10s has blown out to 76 bps. Our yield curve model considers this a very dangerous development for stocks. So, we’ll watch to see whether the 10Y settles lower or stocks come off these highs over the next day or two. Oil and gas both held at their white channel midlines discussed on Friday and have both shot above their SMA200s and channel tops.  RB has backtested the rising red TL and SMA100, a reasonable place for a reversal or at least a pause.

While CL has retraced .886 of its losses since Oct 20 and is likely to at least backtest its white channel top at 40.12. I rather think both are overdone. Sustained higher prices like this would simple result in increased production long before any vaccine could have a tangible effect on travel.

The same should be said for equities as well. Most market watchers have expected a successful vaccine all along. So, a 4-5% rally based on the realization is likely an overshoot brought on by algos and RobinHooders.

It will be months before the vaccine is widely available – months during which millions more will be infected and hundreds of thousands more will die. Although the prospects for companies such as American Airlines or AMC Theaters have clearly improved, the benefits from a vaccine will take painfully long to arrive.

We’ll watch for a selloff to reflect the overblown conditions and/or the 2s10s to revert.

BTW, I’m having a little shoulder surgery done this afternoon, so will be out from about 11:15 until tomorrow morning.

UPDATE:  11:10AM

Getting a backtest of the former highs – important support for the bull case. Note that the breakdown of the rising white channel has reversed, and ES has rejoined it.  Rejoining a broken rising channel is generally considered a very strong trend change – and one of the strongest head fakes out there.

GLTA.