Equities and the Economy:

• Buy dip mode prevails.
• S&P moves 1% for first time in 3 months.

As has been the mode for about 9 years now, investors continue to buy price dips. After posting a lousy week investors jumped back into the market yesterday with the Dow rising a very nice 135 points ending at 21,994, the S&P 500 posted a hefty gain of 24 points, 1.0%, to 2,466 and the Nasdaq advanced a big 1.3%, 84 points, to 6,340. It was the first time the S&P has had a daily move of at least 1.0% in either direction in 3 months. That being said, volatility remains low. Yesterday the Dow, which moved 0.6%, logged its longest period, 61 sessions, without a 1% swing in about 22 years. A lack of volatility imputes a lack of conviction by investors, which also means price moves are on lower volumes and must be taken with a “grain of salt.”

There wasn’t any economic reports of significance released yesterday. The only thing that caught my eye was that William Dudley, the President of the Federal Reserve of New York, said yesterday the Fed will raise rates once more before the year’s end and that at the FOMC meeting next month they would almost certainly set a time frame for reducing the Fed’s balance sheet which has been tremendously expanded through its multi-year QE programs. The significance here is that 1) the New York Fed Bank position is a permanent voter on the FOMC and 2) Dudley is considered a close ally of Chairperson Yellen meaning his sentiments are usually aligned with hers, which means there’s at least 2 voting members that want to tighten monetary policy. Remember, equities love QE. Not so much a tighter monetary policy.

This morning risk-on prevails with the Dow up 59 points.

Oil

• EIA reports U.S. shale production to hit record level in September.
• Prices fall sharply.

There were 3 data points that weighed on oil prices yesterday. First, China released economic growth data and while showing the economy continues to expand, the data came in less than economists were forecasting, second, the U.S. dollar strengthened vs. foreign currencies and third, and this was the big driver, the EIA released its Drilling Productivity Report forecasting oil production in the 7 major shale plays to increase in September by 117,000 bpd to 6.149 million bpd. The report covers 85% of onshore production in the lower 48. Interestingly, the production increase comes at a time when the oil rig count is leveling off. This is not the report OPEC wanted to see. The bears came out in force on the data pushing WTI down a material $1.23 to $47.59 closing at its lowest level since July 24th. Brent fell $1.37 settling at $50.73.

I’m not sure you know this but shale formations exist everywhere around the world, with very large ones in China. While the U.S. E&P companies have led the “shale revolution” with their technology, it’s only a matter of time before the technology spreads throughout the globe. And China wants in. At a conference in Beijing, officials said that commercial production of shale gas is likely to start in the northern part of the country, however no time frame was given. China wants shale production for two reasons, 1) their domestic oil production has been declining in recent years, and 2) they want the natural gas as an alternative fuel to oil to combat smog.

This morning WTI remains on the defensive trading down 43¢. The $50 level is proving to be really strong resistance.

Courtesy of MDA Information Systems LLC

Natural Gas

• Profit taking comes in.
• Weather forecast remains supportive.

The $3.00 level has been material resistance and when it couldn’t be penetrated for a sustained period of time traders reversed course selling their length which pushed prices down 2.4¢ on the day to $5.959. This was just chatter in the first Nymex month or two for the calendar strips were virtually unchanged. We’ve been trading broadly ( + or – 25¢) around $3.00 since March.

Today’s weather forecast is definitely supportive of prices with above normal temperatures expected for the Midwest and East beginning August 20th through the end of the month. Traders must be seeing something else this morning because they’re not buying it with natty down a penny.

Elsewhere

Oreos! Whether they’re dunked in milk, crumbled over or mixed in ice cream, or crumbled into a pie crust, they’re awesome! Well here is some Oreo trivia I bet you didn’t know.

• The origin of the name is unknown. However, a few theories exist. First, that it came from the French word “Or,” meaning gold, after the early packaging which was gold. Another is for the Greek word “Oreo,” meaning beautiful, nice or well done. And then there’s this one: because “Oreo” was short and easy to pronounce.

• Oreos was a take-off of Hydrox which was the original cream-filled chocolate cookie and came out in 1908. Oreos were released in 1912.

• You know those Double-Stuf Oreos? (yes that’s spelled correctly) Well they’re not. There’s only 1.86 times more cream than regular Oreos.

• Oreo has over 42 million Facebook followers. The New York Times has 31% of that: 13 million.

• Oreo’s first crazy flavor was Birthday Cake, released in 2012 for its centennial celebration. Since then the company released new flavors quarterly.