Good morning. Well the equities markets are definitely working on a “correction.” Stocks have fallen for three consecutive days with the S&P 500’s loss yesterday of 17 points, 0.85%, to 1973. Its now fallen 5% from its record high put in on December 5th. I don’t know about you but it sure has felt more painful than that (or course I do have some leveraged ETF’s). Yesterday the Dow lost 112 points, 0.65%, to 17,069 and the Nasdaq dropped a big 57 points, 1.24%, to 4,548. Yesterday’s price action was really disappointing with the Dow up early in the morning but a bout of late day selling took all the indexes material lower into the close. Technically, and I mean that literally technically, the first significant support level for the S&P is in the 1,943 to 1,969 range. That is 50% to 62% retracement level of the previous up move from the recent mid-October low to the December 5th high (for those really inquiring minds research Fibonacci numbers). Obviously, we’re close to the top end of that range. Interestingly, yesterday was the first day equities did not follow oil. Actually, it did through most of the day for when oil rallied so did stocks but in the last hour or so when oil was holding its own equities were purging.

The Russian ruble has the attention of traders, investors and even central banks everywhere and its price action is simply staggering. Remembering that a 5% move in a year is a big move for a currency, the ruble fell 14% a few days ago then rallied 15% the next day on word of Russian bank intervention and then fell 10%-15% in a matter of minutes yesterday. The central bank there has been actively buying rubles and selling dollars and said it is prepared to continue doing so and will spend considerable sums to support the ruble. I wish them good luck for history has shown that a central bank’s effort to support its currency has almost always ended in abysmal failure. Yes, there are exceptions but they are very rare indeed.

The FOMC concludes its two day meeting today and everyone is looking to see if the words “considerable time” will be omitted from the post meeting communique with reference to keeping interest rates low. The market is actually prepared for the words to be deleted but I expect the Fed to address the topic using different, more “passive” words.

This morning Dow were starting nicely higher 103 but beware for ti could easily be as Yogi Berra said, “It’s déjà vu all over again” for this is exactly what’s happened recently only for selling to come in later in the day.

WTI prices limped across the finish line yesterday with it closing up 2¢ at $55.93. The January Brent contract expired yesterday on a very weak note getting whacked $1.20 settling at $59.86. Interestingly, the term structures, and you regular readers know I always watch them, moved sharply bullishly yesterday with the nearby futures gaining markedly on the deferred futures. This is the first material shift in the term structure in quite a while. Now one day does not make a trend but my antennae are raised.

I’ve been in the energy markets a long time and I’ve told some of my clients this would happen and yesterday it began and more will come. IN times like these energy companies break out their checkbooks and buy other energy companies. Repsol, the largest Spanish oil company, is making a very clear bullish bet on oil with its announcement it will purchase all of the assets of Canada’s Talisman Energy. Why do I say it’s a big bet? Because the Talisman acquisition will double the size of Repsol making it one of the 15 largest oil companies in the world.

Unsurprisingly but reinforcing the bearish market, the Russian Oil Minister overnight announced Russia would not cut its oil output which is once again bringing forward the fact the world is flush with oil. Yesterday was just a pause in oil’s collapse for it’s trading down 69¢ and once again approaching its 5+ year low. WTI is down 50% from its June peak which is bringing some technical short covering. However, I fully expect to see prints in the $40’s before this move lower is over.

Courtesy of MDA Information Systems LLC

In spite of a bullish weather forecast natural gas prices fell yesterday with the January contact down an even 10¢ closing at $3.619. Over the last two days natty has given up all it gained last Friday. Natty, at least for now, has been range bound with it trading between $3.50 and $4.00 for the last 2 weeks. Natty is up 5.7¢ this morning and I think the expansion of the cold weather further east in the 11-15 day forecast is bringing some buyers. HDD’s will definitely be higher the last week of the year with gas being pulled out of storage to meet demand.

The U.S. consumer should have some additional money for discretionary spending next year. According to the EIA, the average U.S. household is expected to spend $550 less on gasoline in 2015 compared to this year as annual motor fuel expenditures are on track to fall to their lowest level in 11 years. The price of regular gasoline has fallen 11 consecutive weeks to $2.55/gallon down $1.16/gallon from its 2014 peak in late April and the lowest since October 2009. And the EIA is forecasting gasoline prices to go even lower in 2015. Unfortunately for me, I’ve already spent mine on Christmas presents for my two daughters. Have a nice day.