Equities and the Economy:

Yesterday was a sea of red for U.S. stocks with the Dow closing down 77 points, 0.4%, at 17,960, the S&P 500 ended off 14, 0.7%, finishing at 2,098 and the Nasdaq fell 48 points, 0.9%, at 5,106. It’s been a grind down of late with the S&P posting its 7th straight loss, the longest slide in 5 years and only the 4th time in the past 2 decades the index has posted such a long losing streak. Misery loves company for it’s not just U.S. stocks that are feeling the pain. Global equities are lower as well with the MSCI World Index having lost 2.2% off its recent peaks tested on October 24th to trade at a 4 month low. All that being said, the cumulative loss really hasn’t been much, just 2.5%. In comparison, the worst 7 day loss came in October 2008 and was a whopping 22%!. Note the S&P is right at the 2,100 level. That’s important technical support. Another big technical figure is 2,081 which is the 200 day moving average. Breaking a 200 day moving average usually indicates major trend change, particularly if the 10 day moving average breaks a 200 day moving average.

The main event yesterday was the conclusion of the FOMC’s two day meeting, which was actually a non-event. As widely expected, interest rates weren’t changed. The post-meeting communique gave no hints as to whether interest rates will be raised at the FOMC’s December meeting, but the market thinks they will, to the order of a 75% probability, up from 60% a month ago.

Moving on to other economic news, The ADP Research Institute in its closely watched private sector employment report noted private sector employers added 147,000 new workers last month, the fewest in 4 months. Most of the new jobs were in the hotel, restaurant and entertainment businesses. This was a bit of a disappointment for Wall Street was looking for a gain of about 165,000 new jobs. However, ADP revised its September jobs estimate up a very material 48,000 to 202,000 which offset the less than stellar October data. ADP’s report is looked at as a barometer to tomorrow’s Labor Department report. While individual monthly data can be quite divergent, the two reports correlate well over time.

This morning U.S. stocks are finding support at support with the Dow, S&P and Nasdaq barely changed from yesterday’s ending numbers.

Oil

Oil prices have been on the defensive lately, but yesterday’s price action can only be described as carnage with WTI losing $1.33 closing at $45.34 and Brent falling $1.28 settling at $46.86. Yesterday marked a 4th consecutive losing day. WTI has lost $7.00 from October’s 2016 high at $51.93. There was no question what drove prices lower yesterday. The EIA released its weekly crude and products report stating the for the week ending October 28th U.S. crude oil stockpiles rose 14.4 million barrels. That number might not mean much to you but this will. That weekly increase was the largest since the EIA has been collecting data, a whopping 34 years! One could easily argue this was the most bearish EIA report of all time! Continued OPEC output growth is weighing on this market. Iran, Nigeria and Libya reported they increased production in October and OPEC output is at 34 million bpd, the highest level on record. This morning WTI is down 26¢.

Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices continued to get bludgeoned. Yesterday the December Nymex contract lost 11.0¢ closing at $2.792. Natty prices have fallen nearly 44¢, 14%, since the December contract became the prompt month which was on October 28th. As my clients know, I pay most attention to the calendar strips and yesterday’s price action pushed the calendar 2017 marginally below $3.00. Been a long time since I’ve seen that. As I’ve mentioned continuously now for 2 weeks, the weather and forecast have just made the bull’s yoke too heavy. However, as Captain Barbossa said in The Curse of the Black Pearl, “I think I feel a change in the wind, says I.” And what might that be? Yesterday the latest 30/60 day forecast came out and although it continues to forecast the entire country to have above normal temperatures for December, it also forecasts the Great Lakes region to have below normal temps in January. Adding to the bull’s argument, exports to Mexico hit a record high in August (the latest data available). Expect additional records in the future.

Today is EIA storage report day and traders are looking for a 57 Bcf injection. This morning natty is stabilizing being up 1.1¢.

Elsewhere

Congratulations to the Chicago Cubs and their World Series victory! In doing so they’ve broken the 71 year old “Curse of the Billy Goat!” In a rain delayed game the Cubs won 8 to 7 in the 10th inning. I’m not a Cubs or Indians fan, but what a great series! It not only come down to the 7th and final game, the score was tied going into the 9th inning! A baseball fan could not ask for more! It’s been a 108 years since the Cubs last won the World Series. Here’s some facts and events that have occurred since that time.

The Cubs played 15,000 regular season games, losing most of them.

Both radio and TV were invented.

14 teams were added to Major League Baseball.

George Burns celebrated his 10th, 20th, 30th, 40th, 50th, 60th, 70th, 80th, 90th and 100th birthdays.

Haley’s comet passed the Earth, twice.

The NBA, NHL an NFL were formed.

The U.S. fought in World War I, World War II, Korean War, Vietnam War Persian Gulf War, Iraq War and Afghanistan War.

Man landed on the moon.

16 presidents were elected.

Eleven amendments were added to the Constitution.

Prohibition was created and repealed.

The Titanic was built, set sail, sank and was re-discovered.

Wrigley Field was built and becomes the oldest park in the National League.

Flag poles were erected on the Wrigley Field roof to hold all of the team’s future World Series pennants. They’ve since rusted and have been removed.

A combination of 40 Summer and Winter Olympics have been held.

Alaska, Arizona, Hawaii, Oklahoma and New Mexico became states.