Equities and the Economy:

• Dow breaches 20,000.
• All three major indexes set new highs.

U.S. equities closed at all-time highs yesterday with the Dow, after meandering for a month and a half just below 20,000, breaking through that level. 20,000 really doesn’t mean anything technically (not significant number to technicians) but it is a psychologically important number. The blue-chip index rose 156 points, 0.78%, to 20,069, the S&P 500 added 18 points, 0.80%, ending at 2,298 and the Nasdaq added a big 55 points, 0.99%, to 5,656. The catalyst for the move? More Trumphoria. Global investors added to their long positions following confirmation that both Republicans and Democrats are in favor of loosening fiscal policy. The 1,000 point move to 20,000 is the second fastest 1,000 point move in history taking 42 sessions. The record is 24 sessions in May 1999 when the Dow past the 11,000 mark. We can’t forget the “technical” effect in the last two days move. The S&P and Nasdaq’s new record highs on Tuesday broke technical resistance bringing in new buying into those indexes which brought in buying in the Dow.

There wasn’t any significant economic news yesterday so let’s move on today. We’re getting a bit of follow through this morning with the Dow up 45 points but don’t be surprised if we don’t see a material move today after the last two days’ move. We need time to bivouac. Dow 20,000 now is support.

Oil

• Oil prices little changed.
• EIA data corroborates API big increase in inventories.

Oil prices ended slightly lower yesterday with WTI closing down 43¢ at $52.75 and Brent off 36¢ at $55.08 pressured by the DOE’s crude and products report which corroborated Tuesday’s API report which showed a huge increase in crude, gasoline and products inventories. The API showed an increase of 9.7 million barrels last week and the DOE report noted a 9.5 million barrel rise. This compares to only a 2.47 million barrel rise for the 5 year average. Prices are still waffling around the $53 mark. This morning oil prices are getting a boost, WTI up 95¢, on a report out of China noting that Chinese oil production is decreasing due to the economics associated with mid $50’s oil compared to prices a couple years ago which were much higher. At the macro level the battle is between lower OPEC production, slightly increasing global demand and the prospect U.S. oil production is increasing.

Yesterday the U.S. Department of Energy’s (DOE) Office of Fossil Energy awarded contract for the first of several sales of crude from the Strategic Petroleum Reserve. A Confirming Resolution enacted in December of 2016 included a provision for the DOE to sell up to $375.4 million in crude. Yesterday’s sale will be the first of several planned sales totaling nearly 190 million barrels during fiscal years 2017 through 2025.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices creep higher.
• Traders playing the market from the long side on fears of cold late winter.

Natural gas prices closed up 5.3¢ yesterday at $3.332. After being driven down earlier this month on very warm weather the front month contract has now risen 33¢, 10%, over the last 4 trading days. A few forecasters have been mentioning we could have a late winter (February and March) and traders lately have been playing the market from the long side. The past few days have shown some very cold weather in western Canada in the 11-15 day time frame and this morning’s forecast is showing what I’ve been talking about since the beginning of the week, i.e., that the cold “pig” could drop south and then move east. And that’s what today’s 11-15 forecast is showing. The forecast right now has the cold in the upper western plains but as I said, the typical weather pattern is for air masses to move east. With the cold now showing to be dropping the bulls are getting riled up and are taking natty up 11.9¢ this morning.

Elsewhere

As I’ve mentioned on numerous occasions, we’re in a bull equity market. But can you tell me where the reference for “bull” came for a market that is rising and “bear” when it is falling? Well, quite frankly, the origin of these expressions are unclear but it is known they were used to describe markets as far back as the late 1700’s. One theory on how “bull” originated stems from the word’s etymology. The Online Etymology Dictionary says the German root of the word “bull” meant to “blow, inflate,[or] well.” Another theory is that it derived from the way a bull and bear attacks. A bull thrust its horns up in the air while a bear swipes down. Another theory for the term “bear” may trace back to a time when middlemen in the sale of bearskins would sell skins they had yet to receive. As such, they would speculate on the future price of these skins from trappers, hoping the price would drop. These middlemen became known as “bears,” short for bearskin jobbers and the term stuck for describing a downturn in a market.