Equities and the Economy:

• U.S. stocks continue their post-election rally setting new record high on Friday.

• Existing home sales soar to a near 10 year high.

In a holiday shortened session the Dow closed up 69 points, 0.36%, at 19,152, the S&P 500 added 9, 0.39%, to 2,213 and the Nasdaq finished 18 points higher, 0.34%, at 5,399. For the week the Dow was up 1.51%, the S&P up 1.37% and the Nasdaq 1.26%. The big winner was the Russell 2000 Index which rose 2.35% for the week. Seeing the Russell perform like this is very positive sign for the Russell is a very broad index (2,000 stocks) of small cap stocks, which are riskier than large cap stocks, so a move higher shows widespread investor confidence in the equity market. For the year the S&P is up a healthy 8.3%. Although CNN’s Fear & Greed Index is at 72 and in the ”Greed” zone, it is not sufficiently high enough to warrant an impending correction. However, some other technical indicators are flashing we’re getting into over-bought territory so if you’re looking to get long you might want to wait. That being said, this is a bull market and dips are to be bought.

Fundamentally the big news last week was that sales of previously sold homes surged to the highest level in nearly 10 years in October reaffirming the strong demand that’s underpinning the housing market. Existing home sales, which dwarf new home sales, were 4.50 million units, 2% higher than in September and 5.9% higher than a year ago. These numbers crushed economists’ estimates and marked the fastest pace of sales since February 2007. Additional positive news was that September’s rate was revised upward by 20,000. You regular readers know I pay particular attention to revisions because revisions reflect the broader economic times with revisions for the positive in “good” times and vice versa.

This morning the Dow is down 23. Chop.

Oil

• Oil prices get whacked on Friday with WTI falling nearly 4%.

• Prices rebounding today on OPEC meeting.

Last Friday WTI fell $1.90, 3.96%, closing at $46.06 and Brent dropped $1.76, 3.59%, settling at $47.24. The impetus for the move was that Saudi Arabia said they would not meet non-OPEC nations today, i.e. Russia, to discuss production cuts. My take on this is this was an excuse for the longs to take some profit. WTI prices had risen materially over the past 7 trading sessions and was overbought. Even with the big sell-off WTI was up 13¢. OPEC meets this Wednesday in Vienna. OPEC’s going to have its work cut out for itself if it wants to raise prices. Why? Because the U.S. rig count continues to increase even in this environment. Last week the rig count increased by another 5, 3 oil, 2 natural gas, and the rig count is up materially from just 6 months ago. In May 2016 there were 316 oil rigs working and a total of 404 rigs working. Last week there were 474 rigs working and a total of 593 rigs working. That’s an increase of 158 rigs for oil and 189 total rigs in about 6 months! Bottom line, the U.S. producer has restructured their cost structure, targeted more productive plays and increased efficiency where they can make a profit at current prices, especially in the Permian basin where half of all the rigs in the U.S. are operating.

WTI was up as much as $1.08 this morning but has pulled back to being up 54¢ in choppy trade with OPEC (Saudi Arabia) desperately working to save a deal.

Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas prices have been screaming higher. Calendar 2017 price up 48¢ in three weeks.

On Friday the December natural gas price rose 5.9¢ settling at $3.071 and while this is a fairly minor move prices have rallied 55¢, 20%, in a little more than a week of trading with the calendar 2017 strip, which sets your electricity price, skyrocketing 48¢ in 3 weeks. While the weather forecasts, both the short and long term, have remained benign and natural gas storage levels are at record highs, traders are focusing on flat y-o-y U.S. production and increasing demand and with the heart of the winter still ahead and are playing it from the long side. This morning the weather forecast has shifted materially cooler from last week’s forecast with normal temperatures forecasted in the midcontinent and east and cold weather forecast for the northwest which is pushing prices materially higher this morning with the December Nymex contract, which expires today, up 12.0¢ to $3.205. Wow!

Elsewhere

There is something ubiquitous in every household in America. Well, 50% of them anyway. WD-40. Yes, WD-40 is in half the households in the U.S.! That’s a heck of a lot of WD-40! So you’ve picked up the can time and time again, but did you ever think about what WD-40 stands for? The answer is “water displacement 40.” As in, it was the 40th attempt by the chemist Norman Larsen who helped develop the product with the name taken straight out of his lab book. He was trying to concoct a formula to prevent corrosion, a task which is done by displacing water. Norman’s persistence paid off when he perfected the formula for WD-40 on this 40th try.

WD-40 was invented by the three founders of the Rocket Chemical Company of San Diego, California. The team of inventors were working hard on a line of industrial rust-prevention solvents and degreasers for use in the aerospace industry. WD-40 was first used to protect the outer skin of the Atlas Missile from rust and corrosion. When it was discovered to have many household uses, Larsen repackaged WD-40 into aerosol cans for consumer use and the product was sold to the general public in 1958. Two of the craziest purposes for WD-40 include a bus driver in Asia who used WD-40 to remove a python snake which had coiled itself around the undercarriage of his bus, and police officers who used it to remove a naked burglar trapped in an air-conditioning vent.