Good morning. Two years of uninterrupted gains in U.S. stocks. 3 in 5 financial professionals saying the market is on the verge of a bubble or already in one. Of a poll of 562 investors, analysts and traders surveyed by Bloomberg, 47% say the equity market is close to unsustainable levels and 14% say we’re already in a bubble. Almost 33% called the market for lower-rated corporate debt overhead. Biotechnology stocks are treading more than 500 times earnings. Mega-deals are resurfacing and bond sales are at records. Paranoia is setting in amongst fund managers. And so what happens? The Dow yesterday closes up 78 at 17,138, a record high. For the 15th time this year. The S&P 500 added 8 points to 1,982 and the Nasdaq gained 10 to 4,426. Giving stocks a lift were a couple of factors. First, the Fed released its Beige Book which said economic conditions and labor markets showed improvements across the country into early June. Second, better than expected earnings and merger talks. Regarding the former, Intel posted market pleasing results and the latter, Time Warner shares jumped a whopping 17% when the media company confirmed it rejected an $80 billion offer form 21st Century Fox. M&A activity boosts stocks prices because it signals that corporations are healthy and see value in assets the public markets do not see.

Photo by Serge Melki / Licensed under CC BY 2.0

Now my clients know I preach that all markets get over done to the top and bottom (with the latter giving us nice opportunities to lock in low energy rates!) because markets are driven by psychology. And equities may just be in such situation. We could be in for some serious volatility folks. But there’s a saying in trading, “The trend is your friend” so the thing to do is to tighten up your stops.

Overnight the Asian markets all closed marginally lower but the European markets are trading materially lower and as so often happens, those markets, particularly the European markets, affect Dow futures which are 15 points lower. This morning Microsoft announced they will cut 18,000 jobs, 14% of its workforce (that’s material!) this year as it trims newly acquired Nokia phone business and reshapes itself into a cloud-computing and mobile friendly software company. I’m sure the IBM/Apple partnership is getting Microsoft’s attention.

WTI jumped $1.24 closing at $101.20. Brent actually fell 17¢ to $105.85. The impetus for the formers move higher was the DOE’s weekly crude and products inventory report showing crude inventories fell a surprising 7.5 million barrels last week. The market was expecting a decline of only 3 million barrels. Additionally, gasoline inventories rose much less than expected. WTI was due for a bounce. Prices were at 2 month lows with the market somewhat oversold. I can easily see a bounce into the $103 to $104 range. And we’re getting closer to those levels this morning with the bears on the ropes and short covering with WTI up $1.34

Natural gas eked out a 2.2¢ gain yesterday closing at $4.119. Chatter. Today the EIA releases its weekly storage report with the market expecting a 100 Bcf injection. Last year for this week we saw only 62 Bcf injected and the 5 year average is 65 Bcf so we should make up some material ground on the storage deficit. We need to. Very mild conditions will prevail in the 1-5 and 11-15 day time framed which will allow us to continue to cut into the deficit over the next few weeks. Electric generators will be ramping up and burning gas next week though with some heat hitting the Midwest and east. Ahead of the storage report traders are hitting it with August trading 6.8¢ lower. Stay tuned. Have a nice day.

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