Good morning. Well the liquidation and correction is in full swing. Is it the curse of October? Yesterday the market just got pounded extending its losses from Monday with the Dow falling a very material 273 points, 1.60%, the S&P 500 down 30, 1.51%, to 1935 and the Nasdaq closing at 4,385, down 70, 1.56%. You’re probably wondering why this is happening when the U.S. economy is continuing to look better. Well what you might not be hearing or reading about is that Europe’s economy is really weak (especially the most important countries Germany and France) and China’s growth is slowing. Add in the Fed reducing its bond buying program (QE) and that the ECB can’t figure out how to buy assets since there’s no single asset to purchase (they’d have to buy individual countries sovereign bonds which you can imagine has both huge practical and political challenges) which means the buying of equities is drying up. Remember, you don’t necessarily need selling for a market to drop, only the buying to stop. Then there’s the fact we’ve not had a correction in 3 years and we’ve got a (im)perfect storm. And what’s bothersome is the market fell hard in spite of some pretty good economic news here. The Job Openings and Labor Turnover Survey (JOLTS) yesterday showed U.S. employers posted 4.84 million job openings in August which is an increase of 230,000. Not only did this beat Wall Street’s estimates but this is the most jobs posted since January 2001.

This morning Asian markets closed mixed with the Hang Seng’s loss offset by the Shanghai composite gain but Japan’s Nikkei get whacked down 1.19%, material but that’s a volatile index. Looking at Europe where the markets are open, well I don’t really want to look there because the major indexes are all trading negative. Here in the states things are looking a tad better because, well, we’re not falling with Dow futures flat to yesterday’s close.

From a technical aspect we’re at a very, very critical point. The Russell 2000, obviously a very broad index, was the first of the major indexes to break support. It is now right on major support dating way back to Q4 2011. If we can’t hold here, well, batten down the hatches.

Oil has been weak but add in the liquidation of assets generally and it gets ugly for the bulls. Yesterday WTI lost $1.49 closing at $88.85 and Brent fell 68¢ to $92.11. WTI closed at its lowest price in 17 months and Brent closed lower for the 5th time in 6 days. Yesterday the IMF released a report cutting its global growth forecast for 2015 (4% to 3.8%) and the EIA released a report cutting it 2014 and 2015 crude price forecast. Add in Saudi Arabia’s intention of not cutting production and giving up market share and the bulls are just getting slayed. If the $17 discount for Permian Basin, Texas crude is holding it means netbacks to those producers are just over the all-important $70 level and I can guarantee you the producers of the tar sands in Canada are netting back less than $70. And it’s only getting worse this morning with WTI down $1.18 which puts the Permian well head price right at $70. Now there is hope for the Permian producers for new pipeline capacity is coming on very soon (if not already) with further expansions next year.

Natural gas ground 5.8¢ higher yesterday closing at $3.957. The shorts might have taken some profits with the noon forecast update coming in a little cooler. Today’s forecast is a tad milder than yesterday’s for the Midwest and east and this morning natty is giving up most of what it rose yesterday being down 4.7¢ this morning. Quite frankly folks this is all chatter as we straddle the $3.90ish level and wait for tomorrow’s storage report. If it doesn’t rain you folks in the Midwest and east are going to have some spectacular weather next week!

Red Bull just settled a class action lawsuit. Guess what for? Because it didn’t “give you wings!” Yep, the lawsuit begun by Benjamin Careathers states the company’s slogan is dishonest. Actually, no one believes Red Bull will actually make you sprout wings but it is generally understood that the drink should give a higher energy boost than the average cup of coffee. The problem for the company is that it doesn’t, at least based upon the judge’s decision. Now here’s where it gets close to home. Per the settlement, anyone who has purchased a Red Bull energy drink since 2002 is entitled to a $10 or $15 Red Bull product with free shipping! I would be included in that group. Have a nice day.