Good morning. Death by a thousand cuts. That’s what’s happening to U.S. stocks. Well folks, the correction is in full swing with the Dow closing down another 223 points lower, 1.35%, at 16,321, the S&P 500 losing another 31 points, 1.65%, to 1,875 and the Nasdaq down another 63, 1.46%, to 4,214. I don’t know what’s going on each day but it seems like when the clock hits 2 PM Eastern a ton of sell orders hit the market. For the entire session yesterday (and it happened last week as well) up until 2 PM the market was trading on either side of unchanged. And then the 2 o’clock hour hits and bam, the flood gates open with sell orders and stocks fell like a rock in water (you should see the slope of the intraday price curve!). Why does my gut tell me we’re not done going down?!

There was really nothing new and what there was, was positive. Comments from the Fed yesterday that interest rate hikes could be delayed and stronger than expected Chinese trade data (exports growing 15.4% y-o-y in September and imports up 7%) were not enough to support the market and when the S&P broke below both its 200 moving average and 1,900 it was all over but the crying. The fat lady had sung. CNN’s Fear and Greed Index has fallen to 1 (see below) on a scale of 0 to 100. Fear is rampant. Safety is sought. And one safe haven is gold which rose to a 4 week high yesterday at $1,232/oz.

What is of concern to me is how this market is trading intraday. Bull markets open lower and close higher. Bear market open higher (like yesterday) and close on their lows (like yesterday). This morning Dow futures are up 72. Let’s see how we close.

WTI managed to stabilize yesterday closing down 8¢ at $85.74 but Brent continues to be under pressure falling $1.32 settling at $88.89. Oil couldn’t even find a bid on the bullish data out of China and the dovish comments by the Fed! Not a good omen for the bulls. Oil is looking for a bottom and unless demand increases, which certainly appears unlikely in the near future with Europe teetering on slipping back into recession and the ECB helpless to aid, or supply is cut, which Saudi Arabia says it’s not going to do, prices will fall to a level where it’s uneconomic to drill or produce. That most likely begins with the tar sands in Alberta, Canada which, according to my research, needs $70/bbl to be produced economically. Now based upon yesterday’s close of $85.74 you may think prices are way above that level but the netbacks are currently close to $70. If WTI goes below $80/bbl the netback will definitely be below $70. The next level lower will be the development of new shale oil wells which it appears Saudi Arabia is targeting. This morning WTI is down another $1.06¢.

Natural gas continues to meander closing up 5.7¢ yesterday at $3.916. That $3.90ish level has the gravity equivalent of a black hole! That being said, we’re going into winter and it feels like natty has found a bottom and price “surprises” will be to the upside. I mean, who wants to go into the winter short natural gas at the coal equivalent price with natural gas storage levels 8% below the five year average with a weather forecast for temperatures to be below normal in the upper Midwest for December through February? This morning natty is pretty quiet up 3.4¢.

It’s still the season. And I’m not talking about autumn or earnings but the hurricane season. Fortunately, this year hurricane activity has not gotten much space in this report but Gonzalo is a reminder the season is not quite over. Gonzalo is currently a category 2 hurricane over the Virgin Islands and is expected to grow in strength and become a “major hurricane” today. The good news is it’s currently heading northwest and on Thursday will turn northeast missing the U.S. mainland by a wide margin. Not so good if you live in Bermuda for you’re in for a direct hit. Have a good day.