Good morning. As I say, it’s not the open that counts. It’s the close. Yesterday morning Dow futures were up triple digits. It closed down triple. The Dow lost an even 100 points, 0.6%, yesterday closing at 17,181. The S&P 500 fell 13 points, also 0.6%, ending at 1,990. The Nasdaq got absolutely bludgeoned closing down 49 points, 1.04%, at 4,605 with the Biotechs getting creamed down 2.8%. The unabated fall in oil prices continues to weigh on investor confidence as they question global growth, or more articulately, lack thereof. Oil is the focus of investors’ appetite for equities right now and what oil is doing is what investors are doing. Example, yesterday morning in Europe Brent’s price was up which prompted a rally in the markets there but as crude fell to new lows investors mood turned sour (pun intended!) and the major exchanges finished lower. U.S. equities did the exactly the same thing. As I mentioned yesterday, on Sunday OPEC reiterated its production quotas were appropriate, which is another way of saying Saudi Arabia is not going to reduce production because they’re the only one that will, and there would not be an emergency meeting before the regularly scheduled meeting next summer.

There was some domestic economic news yesterday. The Fed reported that manufacturing production rose an impressive 1.1% and well above Wall Street’s expectation of 0.5%. The increase was primarily due to automobile production. The 12 month period ending in November is up a solid 4.8%. On the negative side, the NAHB report on housing was modestly disappointing with its index losing a point to 57 from 58 with economists thinking it would actually gain a point.

The FOMC meets today and tomorrow and investors will be reading the post meeting communique to see if they remove the words “considerable time” with respect to not raising interest rates. It’s generally believed they will delete them but I guarantee you they’ll include language to the effect they are monitoring events “abroad” for all hell is breaking loose economically in Russia. In the middle of the night in Moscow the Central Bank of Russia raised the overnight bank rate from, are you ready?, 10.5% to a truly staggering 17%! Folks, that’s a 62% increase!!! The move is an attempt by the bank to persuade money from leaving Russia, which it has been doing tsunami style the last few months. Why? What would you do if the U.S. dollar fell 50% in value in less than a year. At the beginning of the year the ruble was trading 32.85/U.S. dollar. At one point yesterday amidst true, unadulterated panic the ruble fell to 69 rubles/dollar. It was down 14% in one day! Folks, a 5% move in a foreign currency in a years’ time is a HUGE move. 50%, truly staggering! This is a truly desperate move by the Bank of Russia. This will rally the ruble but only temporarily. History has established precedents. Many years ago Mexico tried the same with its actions only proving to be ephemeral. Do you remember September 16, 1992, aka Black Wednesday in Britain? That was the day the Bank of England ceased to defend the pound with George Soros leading the way in shorting it and racking up at profit of at least a billion dollars. The Russian ghost rattling its chains dates back to 1998. That’s the last time Russia tried to save its currency with measures this drastic. It didn’t work then and it won’t work now. The ripple effect was the Dow falling more than 20% in less than 2 months! Sure hope this isn’t the sequel.

Central banks can effective at weakening their currencies for they simply put the currency printing presses into overdrive. However, there have been very, very few instances where central banks have been successful at defending their currency for they have to buy, buy and buy more of it to support it. Of very serious concern to me is that with the ruble and Russian stock market collapsing huge sums of capital and net worth are being destroyed with a rippling effect of decreasing the world’s net worth. This is more than merely the Russian stock market and the ruble collapsing. This is an event triggering very real global concerns.

Global equities are trying to find some stabilization this morning. Asian markets closed mixed and the European market are trading the same but U.S equities are all lower with Dow futures down 47 points, which is actually an improvement from this morning when futures were down triple digits. And guess what? WTI is down $1.11. No doubt we’re in a time when equities are looking toward oil for direction.

As I mentioned, oil is down this morning adding to its losses of yesterday with WTI closing off $1.90 at $55.91 and Brent losing $0.79 to $61.06. What’s more to say than what I’ve stated for weeks. Ample/growing global supply, lower demand via slowing global growth and no cut by OPEC. Like an oil supertanker turning, it’s going to take months for supply and demand to come into balance. Just remember, all markets get overdone, both to the top and bottom amidst euphoria and panic which creates great opportunities. Now I’m not saying WTI is overdone for it would not surprise me, and I even expect, WTI to trade in the $40’s but this is going to set up a great buy opportunity.

Courtesy of MDA Information Systems LLC

Natural gas gave up 7.6¢ of its 16.1¢ rise on Friday closing at $3.719. Traders are taking price direction from 1) the weather forecast and 2) the cash market. The weather forecast rallied the market on Friday showing a shift to colder temperatures in the 11-15 day time frame which continues today although most of the below normal temperatures are west of Chicago and not in the major gas consuming regions of the country. Regarding the cash market, there’s an abundance of enjoyable weather for the next 10 days in the east which is lowering demand thus making the cash market marginally weaker which is what put pressure on cash prices yesterday and pushed futures prices lower. More of the same today with a weak cash market pushing natty down 6.1¢. Keep an eye on coal prices. Have a good day.