Good morning. Coming off record highs and penultimate election day investors stayed on the sidelines and the markets yesterday ended pretty flat to Friday. The Dow fell 25 points to 17,366, the S&P 500 closed flat at 2,018 and the Nasdaq managed to eke out a gain of 8 to 4,639. As I mentioned in yesterday’s report, some disappointing manufacturing data in China and the euro zone weighed particularly upon European equities which carried across the pond. Indeed, there was some economic data domestically but it was ying-yang. The ying. The Purchasing Managers Index came in much better than expected in October at 59.0, up from last months’ 56.6 and always importantly, well above expectations. Production was strong, inventories are in good shape, price pressures are moderate and the order backlog is hefty. The yang. Construction spending fell 0.4% in September compared to August with the consensus ahead of the report being a small increase.

The greenback continues to power higher hitting a 7 year high against the yen and a 2 year high vs. the euro. The yen began weakening materially last week on the Bank of Japan’s announcement it was going to seriously ramp up QE. The euro is weakening as report after report shows the U.S. economy, with the all-important manufacturing sector and employment situation, continuing to improve. Meanwhile Europe’s economy is stagnant, at best, as the austerity, anti-inflation faction (Germany, Finland, Austria and Dutch) battles the monetary expansionists (France, Italy, Greece and Spain) resulting in nothing being done. Just like our Congress!

Speaking of currency, the Russian ruble continues to get pounded hitting new lows vs. the U.S. dollar. In August it was trading at 36 rubles/dollar. Now 43.50. That’s a drop of 20% in only 9 weeks and in the world of foreign exchange that’s an incredibly huge move. Money is moving out of Russia at light speed as sanctions are taking hold and oil prices plummet.

This morning Asian markets closed mixed although Japan’s Nikkei 225 continues to soar higher closing up 2.73%. That market was closed yesterday for a holiday so there’s a bit of “catch up” going on there. The other two major indexes, Hang Seng and Shanghai, closed immaterially on either side of unchanged. Europe continues to be a Debbie Downer trading at best flat which leads us to U.S. equities with the three major indexes all trading marginally in the red (Dow futures down 11). I think investors want to see how the elections turn out although personally I don’t think it will make a difference. When looking at the executive and legislative branches all I see is a continued stalemate; which is why I look to the Fed because their actions over the past 5 years have impacted our economy much more than what’s come out of Washington.

The Saudis wreaked havoc in the oil market yesterday when late in the day they announced their pricing for December crude deliveries. They cut the price to American buyers and modestly raising the price to European and Asian buyers. You can translate this as “We’re not giving up market share in the U.S.” Additionally, I interpret this as their having U.S. shale producers in the cross hairs. On the news, which was reported in the final minutes of the regular trading session, WTI got smashed falling as much as $2/barrel. WTI recovered a tad but still ended the day down $1.76 at $78.78 closing below what was technical support of $80. WTI has moved to contango and this is the first time it’s done that in several years. The shape of the curve (front months relative to deferred months) has and continues to wax bearishly with the spread getting wider. Folks, oil is abundant around the globe. OPEC meets November 27th and it’s going to be a doozy of a meeting with Venezuela and Iran calling for production cuts. Neither of these countries have any intention of cutting production but want Saudi Arabia to do the dirty work. And they ain’t going to do it for one of two reasons, or both. First, their public position of desiring to maintain market share or, second their not so public position, and my theory, of an agreement with the Administration to keep supplies ample and flowing to punish Putin in exchange for the U.S. attacking ISIL which has publically stated for its followers to attack the Kingdom. With nothing more of the same, i.e. no bullish news, and the breaking of technical support, WTI is down $1.68 this morning at $77.10. I’ve been calling for $75 and we’re going to see it. By the way, Brent this morning was down more than 3% near $82, its lowest level in over 4 years.

Courtesy of MDA Information Systems LLC

Natural gas skyrocketed yesterday on the release of a much, much colder forecast for the eastern U.S with a very cold outlook for the second week of November. Natural gas closed up a big 17.3¢ at $4.046 and once again over $4.00. That’s a one day jump of 4.5% folks. Not immaterial. Temperatures in the upper Midwest are going to be 10 to 12 degrees colder than normal. Then you move to California where temperatures will be 4 to 6 degrees warmer. This is the exact same weather/jet stream pattern we saw last winter. Today’s forecast has moved a tad colder than yesterday and natty prices are up 1.6¢.

Start your engines! And many people are doing just that in new cars! Yesterday Ford, GM and Chrysler reported automobile sales for October and they were the best in a decade! Last month U.S. sales increase 6.1% to 1.28 million vehicles. The results, often considered and early snapshot of U.S. consumer spending, continued the strong run for a sector that has outpaced the broader economy since 2010. The last time October sales were this high was in 2004. An improving economy, high consumer confidence and declining gasoline prices boosted sales particularly of SUV’s, trucks and crossovers. Chrysler’s October sales jumped a whopping 22% on strong pickup truck and Jeep SUV demand. I say “Let’s bring back the Hummer!” Have a good day.