Equities and the Economy:

• Stocks end little changed.
• Volume remains below average.

After logging its largest two-week decline since last September the Dow managed to post a meager gain yesterday closing up 29 points at 21,704. Similarly, the S&P 500 and Nasdaq ended little changed from Friday’s close with the former finishing up 3 points 2,438 and the latter closing down 3 points at 6,213. As has been the case for most of the month, trading volume was below average. There’s really not a lot to move the market right now with earnings season ending and turmoil in Washington hamstringing the market from going higher. That being said, we’re still pretty close to all-time highs. For example, the S&P is only 2.2% below its August 7th record high. Let’s move on.

It was a quiet day for economic data. The only report investors cared about was the Fed’s Chicago National Activity Index which came in at expectations. While we’re on the subject of fundamental economic data, a key event is occurring Thursday which is the regular meeting of the world’s central bankers in Jackson Hole, WY with the keynote speech delivered by our Fed Chair Janet Yellen.

This morning U.S. equities are trading higher, Dow up 61, on the coattails of European equities which are in the green. It’s called the “momentum trade.” With nothing else to focus on short term traders look to the overnight Asian and European markets.

Oil

• Prices close lower on technicals.
• Price term structures continue to move bullishly.

WTI and Brent prices both took material hits yesterday with WTI closing down $1.14 at $47.37 and Brent off $1.06 settling at $51.66. This was a technical move. Friday’s big move up left a “gap” on the charts with that move occurring in less than an hour and on very light volume. Being there was no fundamental data released yesterday, the technical traders took control and largely filled the gap ending the day pretty much from where Friday’s rally began.

OPEC held a technical meeting in Vienna yesterday to discuss compliance to the production cut agreement. No announcements were made regarding the results of the meeting but it is worthy to note that per the IEA, compliance with the agreement hit its lowest level this year last month at 75%.

This morning it’s all quiet with WTI down 9¢. Chatter.

Last month Mexico’s national energy ministry opened the onshore portion of the Burgos Basin in northeast Mexico for natural gas and development by private companies. This basin is just across the Rio Grande from south Texas and is basically part of the U.S.’ Eagle Ford formation. The ministry wants to reverse the decline in natural gas production that has occurred with the decreasing investment by PEMEX in the region. Here’s the significance. The Burgos Basin, which accounted for 15% of Mexico’s natural gas production in 2016, holds the nation’s largest undeveloped shale reserves in the country. You regular readers will remember that last week I mentioned China was making plans to exploit its shale reserves. Now Mexico. Prolific shale reserves exist around the world. The only reason they haven’t been exploited is that the countries don’t have the technology. Slowly but surely, they’re acquiring it.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices continue to climb.
• Cash market strong.

Natural gas prices popped yesterday driven by a strong cash market. The September contract closed up a material 6.9¢ at $2.962. The strong cash market brought in the buyers with prices rising from $2.87 to $2.98 in about 45 minutes. Driving cash prices was strong demand in the power sector which hit 38.8 Bcf/d, marking the highest demand day so far this month. Power demand should back-off from this level over the next few days with temperatures falling. The weather forecast for the next two weeks can only be considered bearish, but traders see something else for natty is up 2.7¢ this morning, once again being sucked to the $3.00 black hole.

We’re about to get our second U.S. LNG export terminal. Yesterday Dominion Energy applied to FERC for authorization to introduce natural gas feed gas to its facility in Cove Point, MD to perform commissioning tests. The 0.8 Bcf/d terminal is expected to begin commercial operation in the 4th quarter of this year.

Elsewhere

For many Americans a beach vacation won’t just leave you with a sunburn, it will also burn a hole in their wallets. Per financial planning platform LearnVest, nearly 75% of Americans have gone into debt to pay for a vacation. The survey also showed that 55% of Americans don’t factor these expenses into their budgets. On average, Americans accrue $1,108 in debt for a vacation. Millennials are far more willing than other generations to go into debt (49%) than members of Generation X (37%) and baby boomers (18%).

Two-thirds of people said they will spend more on a week-long vacation than they do on a month’s rent or mortgage payment. Saving money for a vacation was the top financial priority for 32% of Americans versus saving for a home (27%) or retirement (7%). Maybe that, per CNBC, is why the median retirement savings of the average American family is $5,000.