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These are the big levels to watch for the S&P 500 and Nasdaq. Expect ‘wild trade,’ if they break, warns this strategist.

Holiday spirit is thin on the ground, with global assets in the vicegrip of a selloff as we kick off the countdown to Christmas.

Blame growing alarm over the omicron coronavirus variant, of course, but some coal may show up in the stocking of Sen. Joe Manchin, who all but torpedoed President Joe Biden’s Build Back Better plan, and prompted Goldman Sachs to cut its U.S. growth forecast.

And with traders gradually checking out for the holidays, volatility may be no stranger to markets this week. Our call of the day, from Miller Tabak + Co.’s chief market strategist Matt Maley, offers up all the big index levels investors should be watching for, and he warns that “wild trading” could ensue if any of them break.

“As we learned all too well last week, there is still plenty of volatility left in the stock market as we move into the end of the year. Of course, 2021 could act like an ‘old soldier’ and just ‘fade away’…but if the key short-term support/resistance levels are broken, it could still lead to a big move before the end of the year,” Maley said in note to clients.

He said given that markets currently have lots of activity in the options market, with momentum-based algo strategies (using computer programs to automate buying and selling assets, futures, options, etc.), investors could see outsize moves.

Maley explains that if a key support level breaks to the downside, it could trigger so-called “negative gamma,” pushing markets lower in a material way and exacerbated by momentum based “algos” that have much riding on that strategy. On the other hand, if stocks push past key resistance areas, that could trigger positive gamma, with algos buying stocks in a rising market, driving upside moves.

As for resistance levels, Maley points to recent highs of 4,712 for the S&P 500 SPX, -1.38%, 16,057 for the Nasdaq Composite COMP, -1.64% and 2,443 for the Russell 2000 RUT, +1.00%. “If these indices can break above these levels in any substantial way, it should lead to a very nice Santa Claus rally,” he said.

Meanwhile, support levels are marked by early December lows for all three indexes — 4,513 for the S&P 500, 15,085 for the Nasdaq and 2,130 for the Russell 2000. Maley said early October lows though, are much more important support levels, but those will likely be an issue in 2022 rather than this year.

The buzz

“I’ve tried everything humanly possible. I can’t get there,” Manchin told Fox News on Sunday, in reference to months of negotiating over Biden’s signature $2 trillion Build Back Better bill. White House press secretary Jen Psaki called his announcement “sudden and inexplicable.”

Moderna MRNA, +6.86% shares are popping, after the pharmaceutical giant said a study of 20 patients showed its COVID-19 booster lifted protection against the omicron variant 37-fold.

Sens. Elizabeth Warren of Massachusetts and Cory Booker of New Jersey both tested positive for COVID-19; both are fully vaxxed and boosted. And while European countries are weighing up new restrictions, with the Netherlands already locked down, the White House’s top medical adviser Dr. Anthony Fauci warned of a tough winter ahead for the U.S., but no lockdowns.

“Spider-Man: No Way Home,” the third installment in the Disney  DIS, -2.02%, Marvel and Sony SONY, -1.89% trilogy, smashed box-office records this weekend.

Novo Nordisk NVO, -2.86% shares are dropping, after the Danish drug company says it can’t keep up with demand for its new weight-loss drug due to U.S. supply problems.

BNP Paribas BNP, +0.85% is selling its U.S. unit, Bank of the West, to Bank of Montreal for $16.3 billion in cash.

The markets

Stock futures ES00, -1.12% YM00, -1.03% NQ00, -1.25% are down more than 1% across the board, following losses in Asia and a 2% slump in Europe SXXP, -1.40%. Oil prices CL00, -4.11% BRN00, -3.52% are also slumping, and gold GC00, -0.44% isn’t faring that much better. The yield on the 10-year Treasury TMUBMUSD10Y, 1.392% note is also down.

Top tickers

Here are the top tickers on MarketWatch, as of 6 a.m. Eastern:

Ticker Security name
AMC, +3.16% AMC Entertainment
TSLA, -3.14% Tesla
GME, +0.49% GameStop
ES00, -1.12% E-Mini S&P 500 Future Continuous Contract
NIO, -2.80% NIO
DXY, -0.20% U.S. Dollar Index
TMUBMUSD10Y, 1.392% U.S. 10-year Treasury note
NQ00, -1.25% E-Mini Nasdaq-100 Index Continous Contract
DJIA, -1.48% Dow Jones Industrial Average
AAPL, -1.53% Apple
Random reads

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