Good morning. World markets slipped. Japan’s yen fell to another 7 year low. And the Dow and S&P 500 hit record highs again with the former closing 33 points higher at 17,719 and the latter adding 4 points to 2,053. This was a nice rebound for when I wrote this report yesterday morning Dow futures were negative. U.S. stocks shrugged off a Chinese purchasing managers index showing the world’s second largest economy contracting for the first time in 6 months. A German report showed the private sector grew at the slowest pace in 16 months and in France a slight pick-up was overshadowed by the fastest drop in new orders in more than a year. Data from the Philadelphia Fed showed factory activity in the Mid-Atlantic region grew at its fastest pace in 2 decades. Additionally, home resales jumped to the highest in more than a year in October. Folks, the U S of A is the place where capital wants to be.

Here’s a mind blowing statistic. If we end the year with stocks at current or higher levels it will be only the 4th time in the past 100 years the S&P has had three consecutive years of double digit gains. However, a very big word of caution. The last time this happened was in the late 1990’s. Remember what happened then?!

Let’s just move on to today because things are rock’n, in a good way. First, while you were snuggled in your bed in a very surprise move the Bank of China cut its lending rates for the first time in more than 2 years. The move comes amid wide speculation that China could miss its annual growth target of about 7.5%. Growth in investment, factory production, exports and retail sales all slowed in October and the economy grew by only 7.3% in Q3, its slowest pace in more than 5 years. (I’m still amazed 7.3% growth is “disappointing”!) The PBOC also cut its benchmark one year rate by 0.25% to 2.75% and gave banks greater flexibility in setting deposit rates allowing then to offer interest 1.2 times the benchmark rate, up from 1.1 times.

The President of ECB, Mr. Mario Draghi, took a cue from the PBOC and today sent a strong signal to the market saying the bank was ready to “step up pressure” and expand its stimulus programs if inflation fails to show signs of quickly returning to the ECB’s target. He said the bank was prepared, if needed, to expand its asset purchases. This heightened hopes in the financial market the ECB may soon buy large amounts of government bonds of eurozone members. Now he’s said this before but the new wrinkle in today’s comments was the urgency he signaled in getting inflation higher.

So how is this all being received? If you’ve been a regular reader you should know. Equities around the world are higher with Europe’s major bourses leading the way. France’s CAC 40 is up 2.72% and Germany’s DAX is 2.36% higher. Closer to home the Dow just opened up a sweet 164 points. Awesome! Let’s finish the week strong!

Oil finally found a bid yesterday with the December WTI Nymex contract expiring up an even dollar at $75.58. Brent added more, $1.23 settling at $79.33. This market is very short and I do believe there’s some short covering going on as we get closer to next week’s OPEC meeting. WTI this morning is getting a pop from all the QE talk around the globe being up 53¢. That being said, it’s rapidly retreating from earlier this morning when it was up as much as $2.20 over yesterday’s close. This is not how a bull market performs my friends.

Courtesy of MDA Information Systems LLC

Natural gas was totally schizophrenic yesterday. The EIA released its weekly storage report yesterday showing the U.S. withdrew 17 Bcf last week. This was more than analysts were expecting which was a withdraw of 7 Bcf. I believe the difference between the actual and estimate were well freeze-offs due to the cold weather. It’s really difficult to get a handle on that statistic. So natty prices immediately shot up on “the number” but shortly thereafter faded to actually trade lower than Wednesday’s close. Then the noon weather update came out, specifically the European model run. There are about 5 different models traders look at and each gets hot and cold with respect to accuracy. The trick is to determine which one is “hot,” i.e. been accurate, which of late has been the European model. So traders see the European model’s forecast, which showed “colder” and zoom, we’re off to the races and natty ends settling up 11.8¢ at $4.489. Now fast forward to this morning. The weather forecast remains cold for the 6-10 day period but the 11-15 forecast, which is where the new news is, moved warmer and the length is bailing fast this morning with natty being down 16.1¢. The volatility is back in natural gas which should bring in more traders, more volume; and more volatility. Trading in the winter is so much fun!

Now that the natural gas storage injections season is over, let’s take a look at what’s happened over the last 7 months. Storage levels peaked at 3,611 bcf this year, which was last week. That put us 5.7% below last year and 6.1% below the 5 year average. Yes those numbers are deficits but consider this. When we exited the winter back at the end of March storage levels were 50% below last year and the 5 year average. We’ve come a long way, baby! We can thank a very mild summer east of the Rockies for that. And oh, those oil and gas producers using horizontal drilling and hydrofracking. Have a nice weekend.