Equities and the Economy:

• Dow closes at 9th straight record high.
• S&P and Nasdaq retreat marginally.

The Dow closed up 32 points yesterday, 0.16%, at 20,776 marking its 9th straight record high close. Its recent performance has seen the bourse secure its best record-winning streak since January 1987. That’s 30 years folks! The S&P 500 and Nasdaq posted marginal losses with the former closing down 3 points at 2,363 and the latter off 5 points at 5,861. Here’s an interesting chart from Bespoke Investment. Indeed, a streak beyond 10 consecutive sessions is very rare.

No question this market is long in the tooth. The Dow’s 50 day moving average is as far above its 200 day moving average as it has been in 18 years. The 50 day moving average is used by many as a short-term trend tracker while the slower moving 200 day moving average is used as a dividing line between longer term uptrends and downtrends. Am I saying sell? No. Markets get overdone to the top and bottom. This trend could go on for weeks. Trends in the stock market are exponentially longer than trends in commodities.

Fundamental data came in the form of the release of the last FOMC meeting with the committee indicating it would be appropriate to raise interest rates “fairly soon” but were ambiguous on the timing. Traders are marking the odds of a March increase pretty low at 30% but a 55% chance in May. The National Association of Realtors reported that existing home sales rose 3.3% in January to an annualized rate of 5.69 million homes. This was much better than Wall Street was forecasting. Home prices continue to rise to the chagrin of first time home buyers. The median home price rose a big 7.1% y-o-y to $228,000 and the average home was on the market for 50 days compared to 64 days a year ago. A shortage of inventory continues to persist. There’s a 3.6 month supply of available homes for sale. 6 months of inventory is considered a balanced market.

This morning all three indexes are green with the Dow up 38 points.

Oil

• Oil prices retreat on the day.
• API reports bullish inventory data.

Oil prices retreated yesterday with WTI closing down 74¢ at $53.69 and Brent closed off 82¢ at $55.84. Then the API released its weekly crude and products report surprising traders showing that all three categories of inventories (crude, products and distillates) fell last week. In aggregate they fell 6.0 million barrels. This was the first time inventories have fallen this year. The more important DOE data comes out this morning. If it confirms the API data it could indicate that the inventory spike we’ve seen so far this year could be seasonal rather than structural, which is bullish. The API data has unleashed the bulls and WTI is up $1.06 this morning.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices stabilize after having dropped nearly a dollar.
• EIA weekly storage report due this morning.

After dropping nearly a dollar on the heels of what most likely will be a record warm February natural gas prices stabilized yesterday with the March contract rising 2.8¢ closing at $2.592. The rest of the months closed virtually unchanged to their Tuesday close. Forecasts of no cold weather remain the bull’s albatross, but we’ve fallen a long way and non-temperature related demand is up and U.S. natural gas production is down 2.5 Bcf/d y-o-y which is translating into healthy pricing down the price curve. For example, July and August prices are almost $3.00/MMBtu which is a long way away from March’s $2.60ish.

Today the EIA releases its weekly storage report and traders are looking for an 84 Bcf withdrawal which is way less than last year and the 5 year average which were 131 Bcf and 158 Bcf, respectively. I’m seeing some short covering this morning ahead of the storage report with natty up 3.7¢.

Elsewhere

My 18 year old daughter brought to my attention an article which I found fascinating. Per the Washington Blog, since the United States was founded in 1776, she has been in some sort of war 220 years out of her 241 years of existence. That’s 91%! There were only 21 calendar years in which the U.S. was not in any wars. The U.S. has never gone a decade without war. The only time the U.S. went 5 years without war (1935-1940) was during the isolationist period of the Great Depression. No U.S. president truly qualifies as a peacetime president. The article listed every war many of which were obscure and you wouldn’t recognize such as Pennamite-Yankee War, Chickamauga War and Anti-piracy war.

The next Morning Energy Blog will be Monday.  I am out of the office travelling tomorrow   Have a great weekend!