Good morning. It may be the holiday season but it was bah-humbug yesterday in the equity markets with U.S. stocks suffering their biggest one day slide in nearly 7 weeks with the Dow closing down 106 points, 0.6%, at 17,852, the S&P 500 losing 15, 0.75%, at 2,060 and the Nasdaq down 40, 0.84%, at 4,741. And be thankful, it could have been worse for the Dow was down 150 points at one time yesterday. Investors headed for the safety of the hills buying Treasuries with the 10 year yield rising 5 basis points. They also bought “insurance” via the CBOE VIX, aka “fear index,” with it jumping a whopping 20% yesterday. A drop in oil prices may be QE for consumers around the world but when it comes to equities investors yesterday dumped energy stocks as if they had Ebola. The Energy Select Sector SPDR ETF fell 3.9% with Chevron off 3.7% and Exxon Mobil down 2.3%. That’s a big movement for 2 stocks in the Dow which consists of 30 the very largest companies. Moving a company that’s in the Dow index 3.7% is like pushing a transoceanic oil tanker around. It takes a lot of “work” to move it. The energy sector is now down 12.8% for the year and is the only major S&P sector in negative territory for 2014. I also believe investors and traders are “trigger happy” on taking profits. It’s been a good year. The S&P is up 11.5% for the year to date. New highs for U.S. equities continue to be set, as recent as last Friday, and this is occurring with negative economic news out of China, Japan and Europe. Hence, with the year soon coming to an end investors and traders don’t want to jeopardize their P&L’s (and bonuses!) and are content with taking some “chips off the table.”

I think Scrooge needs a visit from a ghost and shake up this market for equities around the globe are plummeting. Asian markets took up where U.S. markets ended getting hammered, especially China’s Shanghai Composite which lost more than 5.4% in its biggest single day decline since 2009. Now before you panic I believe there was significant profit taking going on for that index had risen an incredible 23% in the previous 13 sessions! Like Icarus, it got too high. Europe has had no luck shaking off sellers with all their indexes getting whacked with the “best” performer down 1.62%. The selling continues this morning here in the U.S. with Dow futures down a very material 162 points and pretty much at its low of the day so far. The safe haven of gold is soaring with it being up 1.76% this morning.

Oil prices have been and continue to be the focus of not just investors but everyone around the world. Yesterday prices got bludgeoned with WTI closing down $2.79 at $63.05 and Brent losing $2.88 to $66.19. Of note, WTI closed below its recent previous low of $63.72 set December 1st. Oil prices are now at 5 year lows! It’s the same book folks only a different chapter. Slack global demand and ample supply with OPEC not cutting production. That’s going to change next year. ConocoPhillips is the first big U.S. based international oil producer to announce its 2015 spending plans and they are slashing their capital spending budget by a whopping 20%, $13.5 billion. Folks, I’ve been in the energy markets for 35 years and this is a clear signal to me that ConocoPhillips is not optimistic about oil prices next year. ConocoPhillips is the first. They will be far from the last. This is going to hit oil and gas production hard and fast. The decline curves for a shale well are very, very steep with production after year one being 25% to 50% of initial production. Conventional well decline curves are much less steep. There’s a saying in the oil patch “There’s no better cure for low prices than low prices.” The opposite also holds true.

This morning oil can’t even get a dead cat bounce after yesterday’s bludgeoning trading up 19¢. Chatter. Actually, this may be a positive sign for crude prices being global equities are getting smashed.

Courtesy of MDA Information Systems LLC

After jumping 15.3¢ on Friday natural gas gave all that back and more yesterday closing down a huge 20.7¢ yesterday at $3.595. The weather forecast, more specifically, the warm weather forecast, continues to be the story is bringing the bears out of their caves en masse. Today’s forecast is almost identical to yesterday’s with above normal temperatures predicted to continue for the upper Midwest for the 6-15 day time frame. This Sunday Chicago is expected to see a high 17.5 degrees above normal and Cincinnati 10 degrees above normal on Monday. That’ll melt some snow! In a pattern diametrically opposite to last years, the jet stream is buckled and has become entrenched with a big ridge right over the middle of North America bringing warmer air with it. We’ve got a lot of winter left but $3.63 natural gas for January is just dirt cheap for a winter month. And don’t forget, natural gas storage levels are still lower than last year and the 5 year average. I never thought I’d have to do this in the winter but I’ve got to do some research on where the coal price equivalent is. This morning natty is getting a tad of a bounce being up 4.9¢. Have a nice day.