Equities and the Economy

Good morning. Wow! What a wild ride yesterday! U.S. equities staged a dramatic finish Tuesday after a vicious morning of selling ending the session with modest gains. The Dow finished up 93 (0.53%) at 17,777, the S&P 500 rose 12 (0.59%) to 4,997 and the Nasdaq climbed 5 (0.10%) to 4,997. At 10:35 AM CDT it was looking pretty bleak with the Dow down a material 218 points. Then the bulls came in pawing and snoring starting a slow climb until about 1:22 CDT when reports surfaced that Greek Prime Minister Alexis Tsipras had proposed an interim financing until the end of July and then the market really picked up momentum. According to the Wall Street Journal, Greece asked for extra funds in exchange for some overhauls being demanded from Greece’s parliament. Additionally, the bellwether index the S&P found technical support at the 200 day moving average and the technical figure of 2,045 which got the shorts covering and brought in some folks looking to get long. Remember, when trading you go with the trend and look to enter and exit a trade at support or resistance. Trade the trend for direction and the technicals for entries and exits. I’ve seen many trades where a trader/investor got the direction right but got stopped out because of a bad trade entry.

It appears that yesterday’s move up was a classic dead cat bounce, at least for the U.S. for the Dow is down a material and stinging 119 points. Overnight all three major Asian indexes got destroyed with huge losses of between 3.14% in Japan to China’s Shanghai continuing to get obliterated closing down a blood-letting 5.90%. It was so bad in China today that more than 40% of the country’s listed companies were suspended for trade at the start of the session. There’s a conundrum right now. As I stated, U.S. equities are getting whacked, but all three European bourses are higher ranging from Germany DAX at 0.73% to Frances CAC of 1.02% (after 4 days of losses). Usually early equity moves here in the U.S. get their cue from European equities (which is the reason I watch Asian and European equities).

By the way, the Chinese equity meltdown has resulted in a huge sell-off in the base and precious metals with copper prices hitting 6 year lows! Palladium lost 9% just yesterday. China is the world’s largest consumer of copper and as China goes, copper goes.

Let’s get Greece out of the way. Here’s the calendar and it appears this time the deadlines might be drawn in drying concrete as opposed to sand. Today Greece needs to submit precise proposals on what it intends to do. Tomorrow Greece will meet with representatives of the European finance ministries to explain and defend the proposals. Saturday there is to be a Euro group meeting where these proposals and the Greek defense to them shall be debated and then Sunday is D-Day. That’s when the entire Euro-zone membership shall hold an “extraordinary” meeting apparently to vote on the proposals. If for some strange reason you haven’t been following the Greek drama you really need to tune in for the next few days.

Usually what I’m about to mention is of immense economic importance but is currently being dwarfed by events surrounding Greece and that is 1) Alcoa reports earnings after the bell today unofficially kicking off the earnings season, and 2) the FOMC will release the minutes of its last meeting at 1 PM CDT today.

I think Sargent Esterhaus of the series Hill Street Blues comment to his troops is very apropos in today’s times, “Let’s be careful out there.”

Oil

Oil prices got whipped around yesterday with WTI starting the day in the green but quickly turning negative and at one point in the day off another $2.00 but like equities it rallied back to close down only 20¢ at $52.33. No one made money yesterday with everyone getting totally whipsawed. Brent followed the same trend and actually managed to close positive up 31¢ at $56.85. Last night the API released its weekly crude inventory report noting a small draw of 1.0 million barrels from inventory last week which came in at expectations. Today the DOE releases its closely followed crude inventory report.

The EIA reported yesterday in its Short-Term Energy Outlook that U.S. crude oil production will climb in 2015 to a 45 year high of 9.47 million bpd before slipping next year to 9.32 million bpd. This morning WTI is quiet up 41¢ which is pretty impressive considering equity futures but is getting a lot of help this morning on a much weaker U.S. dollar.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices slipped an even 4 cents yesterday closing at $2.716. Natty prices are now off more than 20¢ from last week’s high and near a one month low. The lack of any major heat waves of late across the major population centers is encouraging the bears. Yesterday traders took their cue from the cash market which was marginally weaker with fairly mid weather across the nation. The extended weather forecast this morning came in a tad warmer than yesterday’s warming up the southeast which is bringing a little support this morning with natty up 1.8¢. That being said, we have a lot of summer left and the bulls are lurking in the background. Remember, the cheaper natty prices go the more it will displace coal and in this country there’s a tremendous amount of coal which creates a price floor in the market.

Elsewhere

Here’s a few interesting Earth facts I bet you didn’t know.

The earth is not a perfect sphere. It has a huge 27 mile high bulge at the equator.

There’s more iron on earth, 32.1%, than oxygen, 30.1%

The center of the earth is as hot as the sun, 10,380 degrees Fahrenheit.

77% of the world’s population live in the Northeastern Quadra sphere.

Have a good day.