Good morning. After five days of massive intraday swings and steep losses the U.S. equities market rallied very nicely on Friday with the all the major indexes closing out the week registering more than 1% gains on Friday. The Dow climbed 263 points, 1.6%, closing at 16, 380, the S&P 500 added 24, 1.3%, to 1,887 and the Nasdaq finished at 4,258, up 41 points, or 1%. Helping us was were good earning reports from heavyweight companies General Electric, Honeywell and Morgan Stanley. Additional good news came in the form of the Thomson Reuters/University of Michigan preliminary sentiment index, aka consumer confidence, rising in October to 86.4, the highest level in 7 years.

Friday’s action was, unfortunately, not enough and left the indexes nursing modest weekly losses, the fourth week in a row. I’m paying extra close attention to the Russell 2000 for as I’ve written previously, it was the first index to fall. On Friday it closed down 0.4% but it did have a good week gaining 2.8%. On Thursday the S&P traded down to around 1,800 which is support on a major trend line dating back to the 2nd half of 2011 and bounced off of it closing above it on Friday. Folks, keep a real focused eye on this. If we break this support things could get ugly. Uglier than last week.

This morning the bears are testing the bulls with Dow futures down 40, the S&P futures basically flat up 5 and the Nasdaq up a nice 24 points. I don’t like to be the bearer of bad news but my bet is we test that 1,800ish level S&P in the near future. Not exactly what the “near future” is but with the psychological and technical damage down last week I seriously doubt the bears have given up.

Oil didn’t do much on Friday with WTI squeaking out a 5¢ gain closing at $82.75 while Brent closed 34¢ at $86.16. I’m sure equities lent support to oil but oil’s gain on Friday was lame considering equities performance. WTI lost 3.58% last week and has ended lower for the last 3 weeks. Brent has fallen for 4 weeks in a row and lost 4.48% last week. The oil markets have been closely watching Saudi Arabia looking for clues on what they might be thinking. There was a report yesterday that Saudi Arabia and Kuwait halted production at a jointly run oil field, which was producing 300,000 bpd, due to environmental concerns. Environmental concerns? Middle East? I’m selling a bridge. You interested?

This morning WTI is getting hit again trading down a buck and the lowest on the day so far.

Natural gas eased off 3¢ on Friday closing at $3.766. It traded as low as $3.715 which was a new low for the year. A mild summer and autumn and ample production have kept prices in check. This morning the weather forecast has brought the bears out en masse and natty is down 8.9¢ and a new low for the year. The weather continues to slay the bulls and is driving prices down this morning with natty down 9.2¢. Looking at the forecast, the 6-15 day time frame is amazingly mild. If we don’t see a lot of rain we’re all going to have some spectacular weather for the Halloween week. It will also allow the U.S. to inject more gas into storage lessening the deficit to last year and the 5 year average. Have a nice day.