Good morning. And it was a good weekend after Friday’s price action. Although equities did not recoup all their losses from Thursday they made a nice rebound. For example, the Dow rose 167 points, 0.99%, closing at 17,113 recovering 60% of Thursday’s decline. The S&P 500 climbed 17 points, 0.86%, to 1,983 and the Nasdaq added 45, 1.02%, to 4,513. The energy sector was the biggest gainer lifted higher by a 1% rise in crude prices (more on that below). Much of the advance came after the government released its 2nd quarter GDP revision showing a 0.4% increase to 4.6% which was actually right at the consensus and showing the economy grew at its fastest pace in 2.5 years. Unfortunately, Friday’s gain was not enough to bring the week into positive territory with the Dow down 1% for the period, the S&P off 1.4% and the Nasdaq down 1.5%. The S&P is about 1.4% below its record close hit earlier this month.

Overnight the Asian markets closed mixed with Japan’s Nikkei and China’s Shanghai closing higher but Hong Kong’s Hang Seng closing a stinging 1.9% lower. There are large protests going on there even as I write over China’s attempt to water down some of their democratic rights. Remember it was only about 7 years ago when Hong Kong was transferred from the UK to China ending British rule there. So you’re going from a “free society” to a community one. What did you think was going to happen?! The Chinese army has yet to engage but we’ve seen this before and if the social unrest continues it will.

Things aren’t looking so good in the West this morning with all three of Europe’s major indexes bleeding and the Dow getting just hammered down 105 points. Sure hope (which is always a bad verb in trading) Friday was nothing but a dead cat bounce on an oversold market. The S&P is trading near its 50 day moving average which is a key statistic technician’s watch and breaking below that will bring in more selling. There’s an upward sloping channel dating back about a year of the bull market we’ve been in the last 12 months showing the S&P can fall to about 1,935 without violating the bull market. This “floor” gets higher every day (upward sloping channel) but it sure feels like the market wants to test this support. As I’ve said previously, you can pooh-pooh the technicals all you want but you better respect them because investors and traders sure do use them when making investment decisions.

WTI jumped a material $1.01 on Friday closing at $93.54. Brent on the other hand fell 15¢ to $96.90. Not a good omen for the Brent bulls when you have so much geopolitical strife including bombings of some rudimentary ISIL oil “refineries” (very loose sense of the word for they aren’t much more than boiling pots!) and prices fall. WTI is finding support around $90. The chart looks similar to the natural gas chart in that crude has bounced off the $90ish price level three times in the last 3 weeks. That’s going to make the bears very reluctant to sell that level. Note the Brent/WTI spread is down to $3.36 as of Friday’s close. Oil producers are finding ways around pipeline transportation constraints using the railroads at the expense of the farmers and coal fired electric plants. The latter have had 5 months to catch up on record low coal stockpiles due to the cold winter and have barely made a dent in the deficit. The Oracle from Omaha made another brilliant purchase buying the remaining shares of BNSF in 2009 as competition for rail cars has screamed higher since that time.

This morning WTI is very, very quiet being down 17¢.

Natural gas did little on Friday closing up 1.3¢ at $3.984 which also happened to be the day the October Nymex contract expired. Natty pushed higher and lower all month but in the end really netted nothing for the month with October expiring only 2.7¢ above where the September contract expired. Let’s move on to this morning for there’s a big change in the weather forecast (see below). After some spectacular weather this week the Midwest and east will be cooling down next week and then looking at the 11-15 day time frame there’s a cold air mass penetrating the western upper Midwest from the Canadian plains. It’s yet to be seen if this cold air will make its way east but take it from an ex-natty trader, if I was a bear I’d be very cautious about selling right now. This morning the November contract has its first day as the prompt month trading 3.0¢ higher.

I spend considerable time discussing with my clients the retirement of coal fired electric generation plants and their replacement with natural gas fueled plants. Well here’s some research for you that is gratuitous which normally I only share with clients. In the U.S. 16 GW of coal-fired power generation will be retired by the end of 2015 and 8.8 GW of new natural gas fired generation is expected to come on in the same period. This alone is not bearish of natty but add in an improving economy, increased exports to Mexico and exports of LNG and its evident demand is materially increasing. The question is “Can production keep up?” Have a nice day.