Equities and the Economy:

• Dow 12 day winning streak breaks.
• Rally is resuming today.

All three major indexes closed lower yesterday including the Dow which broke its 12 day winning streak, its longest winning streak since 1987. However, the losses for the Dow and S&P 500 were minor. The Dow fell 25 points, 0.12%, to close at 20,812 and the S&P lost 6 points, 0.26%, ending at 2,364. The more volatile Nasdaq took a bigger hit falling 36 points, 0.62%, to 5,825. It was a very good February folks. The Dow, S&P and Nasdaq rose 5%, 4% and 4%, respectively. For 2017, only 2 months, the S&P 500 is up a big 5.5%. This extrapolates to 33% for the year! Ain’t gonna happen folks. I’m not saying “sell” for this is a bull market, but don’t expect results like this to continue. Be happy with what we’ve gotten to date!

Turning to the economic news, the Commerce Department reported that its second estimate of Q4 2016 GDP grew at 1.9%. Amazingly, this was the exact same number as their first estimate. I can’t remember the last time this happened. In other news, the Conference Board reported its index of consumer confidence was115 in February. This is the highest level this index has been in 15 years! Booyah! Lastly, the Chicago Fed reported its manufacturing index for the area hit a two year high. Folks, the economy is churning along just great. Much better than Europe’s, Germany’s or Japan’s.

This morning the bulls have returned. The Dow is up a huge 242 points!

Oil

• Groundhog Day.
• Supply battle on a global scale.

WTI fell 4¢ to $54.01 and Brent lost 34¢ to $55.59. Yawn. There’s a battle of supply at a global scale going on. OPEC is trying really hard to reduce global supply to match demand, and the U.S. is pushing to fill the gap. Compliance with the OPEC agreement production cuts has been remarkable in the neighborhood of 88% while the U.S. rig count continues to climb. And as prices go higher, so will the rig count. All I can say is OPEC better extend their agreement which ends June 30th or the bottom is going to drop out of prices.

The API released its crude and products report last evening and sparing you the numbers, it was modestly bullish. That’s why WTI is up 24¢ this morning.

I always watch the technicals as well as the fundamentals. The WTI chart has caught my eye. As I’ve consistently said, WTI hasn’t gone anywhere since early December. However, the charts show a “pennant” formation since the beginning of February. The daily price range of WTI is getting smaller and smaller. It’s like a spring being compressed. Bottom line here is it looks like we could have a breakout soon. Not sure which way the price breakout will be though!

Courtesy of MDA Information Systems LLC

Natural Gas

• April’s first day rallies on short covering.
• Weather forecast showing first half of March to be materially warmer than normal.

April spent its first day as the prompt month rallying closing up 8.1¢ at $2.774. This may have been some short covering by the bears when prices failed to break below last week’s 8 month low of $2.522. Also, the cash market picked up a bit with some buyers coming out yesterday to lock up supplies for the month of March. The warm weather pattern persists and shows materially above normal temperatures for the Midwest and east for the first half of March. You folks in those areas are looking at an early, beautiful spring! We in Houston are looking at an early summer. Ugh. One data point I continue to focus on is production. The oil rig count is rising but it doesn’t seem to be helping gas production. We’re down 2.8 Bcf/d compared to a year ago. This morning it’s quiet with natty up 1.6¢.

Elsewhere

People are buying fewer TV’s. Per our EIA, the average number of televisions in American homes in 2015 was 2.3. This is down from 2009’s 2.6. Additionally, a larger share of households reported not using a TV at all. Entertainment and information devices vary by age. Younger households tend to have a lower concentration of televisions per person and a higher concentration of portable devices such as laptops and smart phones. Older households are more likely to have a higher concentration of desktop computers. I understand the move to fewer TV’s. I got my cable TV bill yesterday. Ouch!