Good morning. Equities continue to get pummeled with the Dow closing down 173, 1.06%, to 16,142, the S&P 500 lost 16, 0.84%, to 1,862 and the Nasdaq dropped 12, 0.29%, to 4,215. And are you ready for this, at one point in the day the Dow was down 460 points! The S&P closed at its lowest level in 6 months. I mentioned in yesterday’s report there was a slew of economic data to be released with the hope it would be positive and support stocks. Well it wasn’t and it didn’t. September retail sales were released showing sales were down 0.3% in large part due to fewer vehicle purchases. This was the first decline in 8 months. Inflation data was also released with the producer price index decreasing 0.1% vs expectations of +0.1%. The New York Fed released its Empire Index (manufacturing index for the region) for October stating the index plunged to 6.2% after hitting a 5 year high the month before. And finally, economists slashed their forecast for Q3 2014 growth from 3.3% to 3.0%. All fuel on the fire of a market that is rampant with fear. A stampede to safety is happening including U.S. Treasuries with the yield on the 10 year note falling as low as 1.865%, its lowest level since May 2013. The German 10 year bond yield hit a record low of 0.719%. Think about this. You invest money to get an annual return of less than 1%. Can you say “preservation of capital?!”

It was worse across the pond. The FTSEurofirst 300 Index of top European shares closed down 3.1%, a level not hit since December since December of 2013. Topping that, Athens (Greece) benchmark ATG index fell, buckle in, 6.3%! That’s its biggest one day loss in almost 3 years! Investors are yelling into their phones screaming at their brokers to “Get me the h#$% out!”

So let’s move on to this morning. It apparently ain’t over folks because the Dow is down 139 as I write. Which is good considering it opened down 370 points! What we need folks is a reversal. Where a new low is made on the day and we close higher than the day before. Even better would be closing above the previous day’s high but that is going to be hard to get being the previous day’s highs are so far above current market levels.

WTI managed to hold in there yesterday closing down 6¢ at $81.78 but Brent got trampled falling $1.26 to $83.78. Note that spread is now only $2.00. Brent is “feeling it” more than WTI because the U.S. economy is improving and Brent’s customers, Europe and China, are slowing down. The fall in Brent prices, along with sanctions, is hitting Russia hard. Yesterday the rouble fell to its weakest level on record and shares in Moscow closed near a 7 month low. How’s that feel Mr. Putin?!

I’ve repeatedly mentioned how oil production is increasing around the world (and demand is falling). Well just focusing on U.S production, look at the table below showing shale oil/liquids production since 2007. We call that a “hockey stick” chart!

This morning WTI is being dragged down with equities down $1.12.

Natural gas was an island of calm in the hurricane of selling going on around it closing down 1.6¢ at $3.800. Today the EIA releases its weekly natural gas storage report with the market expecting an injection of 88 Bcf. This is greater than last year and the 5 year average, 79 Bcf and 78 Bcf, respectively, but not materially. We’ve only got 4 more weeks in the storage injection season and we’ll definitely go into winter with about 9% less than last year and the 5 year average. This morning is beginning quietly as traders wait for the storage report with natty up a penny. Have a good day.