Market Recon Wednesday

Good Morning,
                       As I sit down on this train to bang out this morning note, there is a solid shade of green painted across Asian, and European equity indices.  Not to mention, US futures markets.  Looks like they had a party in Tokyo.  Energy shares are leading the way in Asia, as they did in European, and US markets yesterday.  The Ugly stick ??  Forgot where I put that darned thing.  You may be aware that Manufacturing Flash PMIs beat consensus across Europe this morning, which probably did put some folks in a good mood, but that’s not going to be our story today.  We’re going to have a story of our own.
                      I’m sure that you are very aware that we have a very entertaining song and dance routine lined up for you today.  First we’ll drag out some well known performers that everyone of you are well acquainted with.  They usually excite on their own, but today…. for this one time only, these data-points will merely be a warm up act.  Like school children waiting for the 3 pm bell, we’ll wait for 2 pm.  That’s when the dance begins.  First there will be an outline, with sensationalized headlines plastered across every screen in the house.  Then… about half an hour later….with an entire planet watching, enters the star of our show, with all of the bells, whistles, acrobats…. whatever it takes, just to make you fell warm and fuzzy.  Helmets, Flak Jackets, Gas Masks on the hip.  Make sure you’ve got enough water.  Let’s go.
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The Song
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08:30 ET
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Housing Starts & Permits (November):  In October, Housing Starts dropped off to 1.06 million units when measures in a seasonally adjusted, annualized rate (SAAR) sort of way.  The November expectation is for a rebound to 1.14 Million, which would put this number back in line with it’s approximate six month average.  Permits have been above 1 million units (SAAR) in each and every month since June of 2014.  We are looking for a print in the area of 1.15 million.  That would equal the pace seen in October.  Normally, this one does move markets.  Today, with all of the peripheral distraction….. I would not expect that.
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09:15 ET
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Industrial Production & Capacity Utilization (November):  Another high profile piece of macro that will get less attention today than it normally would.  Industrial Production has seen contraction in both September & October.  In all likelihood, November makes it three months in a row, but this will be a close shave.  Consensus is looking for a m/m print of -0.1%, which is smack dab in the middle of a fairly wide range.  I don’t see a skew either way.  Within the train-wreck that is the US manufacturing business, Capacity Utilization has been in almost a constant state of contraction all year.  In fact, after revisions, July was the only month of 2015 to this point, where we did see a plus tick.  Expect ths one to fall from October’s 77.5% to 77.3% ish.
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09:45 ET
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Markit Manufacturing Flash PMI (December):  In November, Markit’s data gave us a much rosier 52.8 in the manufacturing space, than the ISM’s miserable 48.6.  The Empire State, though reporting a lousy number, did beat projections this month, and we don’t see Philly until tomorrow. Most guys I see are still looking for this one to print in the mid 52’s.  Regardless, on the best of day’s…this one does not impact the trading community’s decision making.
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10:30 ET
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Oil Inventories (Weekly):  Hey…. Yo.  We finally saw some contraction in supply last week.  There were some overt reasons for it, but still, it was bigger than expected.  Word is…the goon squad is looking for another drop in inventory, though it will likely be smaller than that last one.
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The Dance
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14:00 ET
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FOMC Policy Announcement & Quarterly Forecasts:  I think we all know what is expected as far as the Fed Funds Rate goes.  KaPow !!  Now, about those forecasts, LOL.  In September these guys bumped up their projections for year end GDP, and lowered their forecasts for Unemployment (as measured by the BLS….Not to be confused with the actual percentage of working age folks who need a job), and Inflation.  Oh, and I’m sure that you all noticed the 2.0% Core CPI yesterday.
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14:30 ET
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Fed Chair Janet Yellen’s Pres Conference:  Even if they do in fact, pull the trigger, you can bet your tail, that Lady Janet sings like a dove at 2:30.  Oh…you’re not going to believe how accommodative policy still is, or how gradual, and data-dependent any possible future normalization of policy might be.  Auntie Janet’s going to try to make sure it’s OK.  The language, both in her statement, and in the press conference will be the key to your afternoon.
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Wednesday’s Earning’s Highlights
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Before the Open: Nothing here caught my fancy.
After the Close: FDX (2.52), JBL (.80), ORCL (.60), PIR (.12).

Market Recon Tuesday

Good Morning,
                       As you rise from that wonderful pillow that you rest your head upon every night, you’ll notice that European shares are in rally mode this morning.  The Stoxx 600 is up nearly 2%, as are most of the individual national indices.  Germany’s ZEW indicator of economic sentiment did beat expectations, but that is not the catalyst here.  European stocks were led higher by the Energy Sector, and are looking to post gains for the first time, after a five session  losing streak.  Huzzah !!
                        The S&P 500 did close last night at 2021, which was technically significant, setting up the possibility of at least a morning rally.  Well, thanks to Europe, and an early bid for WTI Crude, US futures markets are trading well above fair value while I type.  Tomorrow is Fed Day, so there will be no Fed speak to complain about (my third favorite sport, after whiffle ball, and roller hockey) today.  Tomorrow is also when we’ll see our first  headline level earnings releases for the week, so today will be left to the macro, energy, China, and high yield…. or something like that.
                        Keep an eye on consumer related names today, gang.  Some of the retailers (internet & other), and the Staples led the way yesterday.  Like to see that develop.  In the early stages of my 2016 story, and those names are likely to play a significant role.  OK, it’s Tuesday.  You’ve done Tuesday a thousand times.  Work hard.  Stay focused.  No panic.  No fear.
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The Macro
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08:30 ET
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CPI (November): Consumer level inflation might be the most important slice of the macro pie, as far as monetary policy is concerned right now.  Then again, if the FOMC’s collective mind is already made up, it might not be.  The CPI, we know, is not Janet Yellen’s favored measure of this type of inflation, but it is pretty much everyone else’s, and guess what ??  We may measure this puppy on a month over month basis for convenience, but the Fed’s target is 2.0%, and the Core CPI reported in at 1.9% in October.  So, maybe, just maybe we have arrived.  I’ll let you know at 08:30.  Today’s projections are for a 0.2% m/m increase, both at the headline, and at the core.
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Empire State Manufacturing Survey (December):  As usual, the NY Fed kicks off the month’s season of regional Fed district manufacturing data.  Say that five time fast.  In October, both Philly, and KC escaped contraction.  Not this little guy.  The Empire State has printed deep in the hole for four consecutive months now, and the expectation is that this ugliness will continue today.  Be aware though, that of the folks I track, there is an outlier economist on the plus side.  Hey, a dollar, and a dream.  Consensus is for -6 tag.
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08:55 ET
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Redbook (Weekly):  The Redbook  mildly disappointed with a year over year increase of 1.9% last week.  The parking lot at my local mall says we’ll have trouble tackling that 2 handle today.  Potentially interesting number.
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10:00 ET
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NAHB Housing Market Index (December): This one is also know as the Homebuilder Optimism Index, and though this data-point took a step back in November, it still printed above 60 for a sixth straight month.  A seventh month is expected with consensus for today’s number at 63.  The low end of the range is 61, so nobody expects the floor to drop out.
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16:00 ET
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TIC (October): Overall, foreign accounts jacked up their cross-border purchases of US long-term securities in September.  What you may want to keep a eye on here, is the where foreign ownership of US Treasuries is coming from, as that same report showed sharp declines in Chinese, and Japanese holdings in that space.

Market Recon Monday

Good Morning,
                        Spooky, Scary.  Monster Chiller Theater.  If you are my age, you remember SCTV, and that little skit.  Well, the marketplace was more than a little spooky, and scary on Friday, or all last week for that matter.  Investors, and traders alike moved into cash in  a hurry, even at deeply discounted prices.   As you already know, it’s not just stocks and commodities, but it’s high yield bonds that really spooked the crowd toward the end of the week.
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High Yield
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                       We all know what happened over at Third Avenue Management.  We all knew that if everyone headed for the exits at the same time that it would be about as enjoyable as waiting to get off of an airplane so we really should take this in stride.  Uh, yeah.  Truth is when folks lose money, nobody takes anything in stride, unless it’s part of their plan.  I’m going to guess that leaves out most of us.  My thought…if you don’t have a risk management guy impatiently standing over your desk…consider the individual debt item that you’re looking at.  Default rates for these items are not through the roof.  These markets are not going to help you right now, and unless you are in danger of being lefty holding a worthless product, maybe you take your time getting flat, and think twice next time about getting jammed up in such an illiquid environment.
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China
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                      The Chinese National Bureau of Statistics released some interestingly optimistic November data over the weekend.  If the markets are going to take their proverbial foot off of the proverbial throat of the collective commodity complex, then there is going to have to be a rebound in Chinese demand.  I’m not so bold as to say that the Chinese economy turned a corner, but in a year, if indeed it has…this could be what we look back at as the place and time.  Chinese Industrial Production for November jumped 6.2% y/y, which was far better than any of us expected.  That was also the largest y/y gain seen in that space since June.  November Retail Sales also had their best month since December of last year.  If you are looking for a shining positive take away somewhere in the China story, here we undeniably, and suddenly find two.  BTW, Shanghai rocketed up 2.5% in late Monday trading.
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Oil vs. Equities
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                   Don’t forget, it was just Thursday that the price action in Crude seems to uncouple from the price action in equities, and even in the Energy Sector.  That all went out the window during Friday’s backyard session with the “Ugly Stick”, but there are going to be opportunity in various equities as we get to uncomfortable levels in the indices, and perhaps our P/Ls.  Where is support for WTI Crude?  Well, back , before the $40 level really broke, we all were saying that we would see $38, and then if that broke, there would be some melt-down.  That’s exactly what has happened.  Nobody should be in shock, as we probe the $35 area for support this morning.  This is a story that will plague 2016, so get used to it, and learn how to trade around it.  Tertiary thought:  Just think what a mild rebound in the price of Crude will do to consumer level inflation ??  Jeekies.
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                   There is enough on your plate to worry about right now, gang.  I will not go into monetary policy today.  There are obviously no Fed speakers hiding in the shadows, with this being an announcement week and all.  There are no earnings on my radar today, but there are several names that you know well that are reporting later in the week.  Just a reminder, Christmas is next Friday, so if you’re like me, and have left yourself unprepared… you have one weekend left.  Hang tough, friends.  You’ve all done this before.  If you fight the fight, you learn from the fight.  It’s not always winning and losing, sometimes it’s about adapting.  God bless, and carry on.

Market Recon Friday

Good Morning,
                       OK, gang…. it may be Friday, but the ugly stick is still out, and it’s still looking for something to whack.  We’ve already seen disappointing inflation numbers out of Germany, and less Foreign Direct Investment in China than the Chinese were hoping for.  As far as China goes, their National Bureau of Statistics will publish Industrial Production, and Retail Sales data tonight after global markets close for the weekend, and maybe that’s a good thing.
                       Back to our brutish baton.  Most of Asia (ex-Japan) is down close to percent, while the major European indices have all given up something closer to a percent and a half.  Oil ??  WTI Crude is fighting to stay above 36 clams a barrel, while I bang out this note, which is the real culprit.  Obviously, this has been a tough week, and if you really want that Friday night plate of disgusting nachos, you’re going to have to answer the bell one more time.  Stay focused, which is much harder than many realize…and protect yourself.  One MACD crossover at a time.  Small ball.  Maybe wear a helmet.
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The Numbers
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08:30 ET
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Retail Sales (November):  Normally, Retail Sales are a big deal.  OK, we’re not kidding anybody…retail Sales are indeed, s big deal.  They are just not going to matter all that much this one time…. as far as the FOMC policy decision next week is concerned.  We expect that the headline print for November will improve to show month over month growth of 0.2%, up from October’s 0.1%.  We also think that the Core number will improve from 0.2% to 0.3% m/m.  Numbers like this will be supportive of a hawkish decision next week, but even if we do not get it… I think that the increase in the Fed Funds Rate might as well be written in stone.  That is unless something awful happens between now and then.
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PPI (November):  At least at the producer level, we have seen fairly drastic m/m price contraction in both September, and October.  Most economists in my sample seem to expect that this short trend will come to an end in November.  Not that we are very likely to see price increases in this space, but that prices will at least stabilize at October’s levels.  If there is evidence of any increase, it will probably be in the Core print.
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10:00 ET
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U of M Consumer Sentiment (December [p]): Consumer Sentiment, as well as Consumer Confidence took a serious hit in November, missing consensus rather badly in both instances.  Projections are for a mild rebound today for this item.  Let’s look for something in the low 92’s.  Anything more than that would just be gravy.
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Business Inventories (October): The Business Inventories to Sales ratio has been higher than it is now, just not since the dark days of 2009.  We need to see a low number in this space, and the expectation is for a 0.1% m/m increase.  Hopefully, businesses have been able to move some of this stuff off the shelf.  Just a reminder…this is October data,
so it is a little bit stale.
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Army-Navy Game
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             Tomorrow afternoon, at 15:00 ET in Philadelphia, there will be a college football game played between West Point, and Annapolis.  A game played, where the players on both teams actually have to go to school, and do much more than pass their classes.  Navy has a really good team again this year, while Army has yet again struggled.  There will be no prediction for a final score here today.  Just keep in mind, that this is likely the only sporting event that you will watch this year, where every single one of the game’s participants is willing to die for you.
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Sarge’s TRADING LEVELS
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SPX: 2069, 2062, 2051, 2041, 2036, 2026, 2021
RUT: 1156, 1151, 1146, 1142, 1136, 1131, 1127

Market Recon Thursday

Good Morning,
                       Oil rules the world, or something like that.  We’ve seen equity markets correlate fairly closely to the price of crude of late.  OPEC apparently swung and missed at their chance to support the price of a barrel when they took a powder last week at the cartel’s big shindig.  OPEC is now irrelevant, or so they say.
                       So, is OPEC crazy, or crazy like a fox?  Today, we’re getting some insight into the thinking that went into the cartel’s decision last week.  In their report this morning, one can see that by maintaining production, OPEC feels that they have started driving competition from Non-OPEC members out of the biz.  Think US Shale producers, for their production is certainly off.  By continuing on this competitive path, OPEC’s expectation is that for 2016, Non-Member production of “black gold” will drop by some 250K barrels a day.  OPEC also indicates that they expect to see greater global demand next year, supported by the likes of Europe, and India.  An increase in Chinese demand, certainly a possibility…. is not even anticipated in the group’s model.
                      Less powerful ?? Certainly.  Irrelevant ??  Not yet.  These guys do have a strategy, and the last thing you ever want to do, is underestimate your opponent.
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Economics
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07:00 ET
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Bank of England Policy Decision: The BOE had been expected to raise interest rates last year, but with the pace of the recovery cooling somewhat, Mark Carney has been unable to pull the trigger.  They will not hike at this meeting, not in front of the Fed, but if the Fed pulls this off, the Bank of England will likely not be too far behind.  One thing that the BOE has started doing…which I think the Federal Reserve could use as a suggestion… is that these guys publish the Minutes along side the policy announcement.  How cool would that be ??
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08:30 ET
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Initial Jobless Claims (Weekly):This item rose last week to 269K, which actually dropped the four week moving average to 269.2K.  The consistency of this data-point has been remarkable for quite some time now.  The expectation is for that to continue, as consensus for today is 268K.  One note of caution, the range for this release runs as high as 300K, so there are outlier economists on the high side out there for the first time in many weeks.
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Import & Export Prices (November): Inflation ??  Not as far as these two items are concerned.  Neither one of these has printed above zero on a month over month basis since May. Global demand has been, and remains a problem that all can share.  Projections for this release are -0.8% m/m for Imports, down from October’s -0.5%….. and -0.3% m/m for Exports, down from -0.2% m/m.  Think that’s nasty ??  The y/y numbers are more like -7% for Exports, and -11% for Imports !!!  Otherwise, all is well.
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10:30 ET
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Natural Gas Inventories (Weekly): Last week, we finally saw a contraction of 53 billion cubic feet.  This came after 34 consecutive weeks of growth in supply.  Warm weather in the northeast is slowing the drawdown in supply this year, however…our friend who was quite right about Oil Inventories yesterday, is calling for a second straight week of contraction in this space.  Even if you don’t trade this, if you can, you have to watch the book at 10:30.  It will awe you.
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14:00 ET
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Federal Budget Statement (November): For the eighth time in eleven months, the government is expected to have run at a deficit.  The good news ??  They likely cut the $136 billion shortfall that we saw in October in half.  Nice job fellas !!
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Sarge’s TRADING LEVELS
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SPX: 2070, 2061, 2052, 2041, 2035, 2026
RUT: 1163, 1157, 1151, 1142, 1136, 1131

Market Recon Wednesday

.Good Morning,
                        Very disappointing close last night.  Very disappointing.  I was really looking for the S&P 500 to hit 2068 at the end of the day and hold the level.  Well, the index did get there just in time……and then took a closing bell sucker punch right in the teeth.  What’s that French saying ???  Se La Vi, or something ??
                         In corporate news, Kinder Morgan cut their quarterly dividend by 75%.  They did announce that they would take a “look” at their dividend a few days back.  How many more in the Energy sector, laden with debt, and toting these fat dividend yields will follow suit ??  I would think that there’s more to come on this front, and that’s an unknown that has, and will shoo away some who may have bid.  If you’re one of these “cowboys” looking to take a shot here, and you’re a home-gamer…you’ll risk a lot less of your hard earned dough by avoiding the equity, and just stuffing away some long dated calls if you can get them for what you consider to be money that you can lose, and still feed the kids.
                       There are no Fed speakers on  my radar for today, and the earnings calendar is down to a couple of items.  We do have October Wholesale Inventories at 10am, which sounds about as exciting as spending the afternoon waiting for your number to come up at your local DMV.  Traders will likely focus on two main events today.  I did not wear red pajamas, and I did not dye my hair blue, but thing one is the weekly Oil Inventories print at 10:30 ET, and thing two will be the US Treasury’s auction of ten year notes at 13:00 ET.  As appetizing as green eggs and ham might be, I will not eat them at 11 Wall…. no, in fact….I do not even think that I will eat them…no, not at all.
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Thing One, and Thing Two
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Oil Inventories:  Last week, expectations were for a reduction in supply.  Instead of that, we saw a tenth consecutive increase, and it was a rather big one at that.  Well, the little birdie from last week, is going out on a limb, and calling for a reduction, yet again.  I think an entire industry is rooting for our little birdie today.
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10 Year Note Auction:  On 10 November (No, not at Tun Tavern in Philadelphia…..btw…Always Faithful), the US Treasury auctioned off $24 billion worth of 10 year notes.  The yield awarded came to 2.304%, and it came with a bid to cover of 2.58, which is in line with any recent auction of this type.  With the FOMC all revved up for next week, the Treasury will auction off $21 billion worth of these bad boys today.  The last yield I see for the ten year as I type this note is 2.243.  If you see something moving at 1pm, and you can’t explain it right away……
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Wednesday Earnings Highlights
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Before the Open:  KFY (.52), LULU (.37)
After the Close:  MW (.50)
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Open outcry flashback:  I was part of the team that brought KFY public, sometime in the late 1990’s.  The deal got absolutely nuts….we all got fired, and in all of about five minutes…hired back.  One of those “horrible at the time” days that now seems funny.  Ahhh….good times.  Mike, I know you’re reading this, and probably laughing out loud.
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Sarge’s TRADING LEVELS
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SPX: 2085, 2078, 2069, 2061, 2052, 2042
RUT: 1178, 1170, 1163, 1157, 1151, 1141

Market Recon Tuesday

Good Morning,
                        Last night, while throwing some dinner together, I already had plenty of left over turkey in my fridge. (No, not from Thanksgiving, you goon).  Awesome !  Immediately …..problem one was solved.  Now to find something green to put on those plates.  I find a bag of kale in the back of said fridge.  I open that bag, and Hooeeeyy !!  The smell caused my son to make an absolutely ghastly noise.  (Mind you this is a 19 year old hard-charging, fire eater, not some pre-schooler).
                        Well, now that we’re on ghastly noises, I made a similar noise last night when I saw that Chinese Exports had fallen considerably yet again in November, missing consensus.  Imports may have beaten expectations, but still contracted quite sharply.  The reality is that a rebound in the Chinese economy isn’t going to be in the cards if the world isn’t going to be buying their stuff like they used to.  (remember what I wrote about getting consumers comfortable)  Global equity, and US futures markets are responding this morning, as you would expect them to.
                         Hey Dallas did beat Washington last night.  Funny, funny.
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Macro Lite
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                         Speaking of kale, what we’ve got on tap for today can only be considered macro lite.  There are only three items of any interest today, and the most significant of the three is probably the weekly Redbook number that will be released at 08:55 ET.  Tis the season, right?  Last week, this little guy popped to a 3.9% y/y increase, after plugging along with a one handle for quite some time.  Growth is growth, and we never scoff at it, but another fat print would be greatly appreciated by the retailers.
                         We just saw the NFIB Small business Optimism Index for November come in at 94.8, which sound pretty, but not when you consider that the print badly missed consensus, and was the lowest score in that space since June.  Lastly, at 10am ET the October JOLTS number will print.  This one really just barely made the cut today.  This is a note for traders, and traders don’t watch the JOLTS number.  They will if and when Unemployment reaches dramatic levels ever again, but fortunately…today is not that day.
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Friendly reminder:  I’m not telling you what to do, but I’m Irish Catholic, and today is a Holy Day of Obligation.  Just a heads up if you wanted it.  If you don’t want it, carry on.
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Tuesday’s Earnings Highlights
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Before the Open: AZO (8.24), TOL (.84)
After the Close: COST (1.17), KKD (.20), SWHC (.20)
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Sarge’s TRADING LEVELS
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SPX: 2092, 2085, 2078, 2068, 2062, 2052
RUT: 1178, 1170, 1164, 1160, 1154, 1149.

Market Recon Monday

Good Morning,
                        A day that will live in infamy.  74 years ago today.  Jeepers.  Obviously, I don’t remember World War II, but I remember the guys who did go fight that war very, very well.  They were still in the prime of their working lives when I was a young pup, and boy oh boy….. we did idolize them.  My brother and I used to put their air conditioners in every Spring, and take them out every Fall.  We knew where every one of them had been during the war…  Omaha Beach, Tarawa, Leyte Gulf, and each one of those guys was special.  All of us street urchins would stop in our tracks when we were in their presence.  There was that kind of respect.  They’re almost all gone now.  Their sacrifice, and the strain on their families is all but forgotten, but if you know one of these guys, or if you can find one…. your holiday sacrifice will be but one afternoon.  I think you know what to do.
                       Talk about a slow macro week.  (Germany missed on Industrial Production this morning)  There really won’t be much to talk about in that regard until we see Retail Sales this Friday.  Then again, if Janet, and her gang are as ready to rock as they sound, I don’t know how much this stuff will matter right now anyway.  I’m going to at least pretend it does, because dudes, ……it SHOULD.  Markets seem poised to continue trading on sheer momentum right now.
                        If Washington loses to Dallas tonight, the NFC East is ….  I don’t know how you want to finish this sentence, but it sure ain’t pretty.
                        We do have one Fed speaker on my radar, and one slice of macro that will not hit the tape until later this afternoon.  Until then, we can bask in the glow of Friday’s surge that more then undid Thursday’s plunge.  On Thursday night, we (myself included) spoke about kooky things like technical damage.  Guess that was a bunch of malarkey.  The S&P 500 closed out last week up against it’s late November resistance level.  the point here is just reinforcement of what I’ve tried to preach on things like targets, discipline, and protection.  In a wildly unpredictable trading environment, a plan with an emergency exit will allow your brain to rest at night.  Know where you’re going to regroup in an emergency.
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11:30 Fed Speaker:
                  St. Louis Fed Pres. James Bullard is all set to party down, and speak economics in Muncie, Indiana.  Bullard does not have a vote on 16 December, but he will on 27 January.
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15:00 Consumer Credit (October): 
                  This is one of those items that sends out mixed messages.  Most economists get all fired up about increased consumer health when the “revolving credit” portion of this report gaps ahead, gushing over said consumer’s apparent confidence.  For the uninitiated, revolving credit involves credit card usage, while non-revolving credit would include things like auto & student loans.  So, basically….according to all of our acknowledged geniuses….allowing your creditors to rip your eyeballs out means that you must be one confident cat.  Cool beans, kid.  Congratulations.
                  September was a record month for Consumer Credit, largely due to those massive numbers being reported by the auto industry, but also to a lesser degree…. increased credit card usage.  Here’s hoping that if you’re flashing the plastic more, that you are indeed confident, and not desperate.  We’re looking for a print of $19.7 billion today.
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Sarge’s TRADING LEVELS
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SPX: 2111, 2106, 2098, 2092, 2085, 2078, 2070
RUT: 1197, 1191, 1187, 1183, 1178, 1173, 1168

Market Recon Friday

Good Morning,
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The Damage
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                        Holy Smokes !!  That was the kind of beat-down that left most folks (this guy) feeling a little nauseous.  I think it was the kind of session that, even if you were outperforming the market in general, you still might have taken a nasty kidney punch by day’s end.  What the heck?  Was it all the ECB?  To some degree……sort of.  Sprinkle in some technical damage for good measure.  Yesterday morning, S&P futures traded 2095 in the pre-open.  At that time, we already knew how Janet Yellen felt, and we already knew about the terrorist attack in California.  Sure those events did weigh on the markets on Wednesday afternoon, and they were, and still are on our minds, but by early Thursday, market participants were ready to rally.
                        Enter Mario, and exit the US Dollar trade.  You can’t blame the ECB for wanting to leave something in their back pocket.  I even suggested that they do so in my note 24 hours ago.  My suggestion, however…was to omit the interest rate cut on this go round.  Adding muscles to the month by month QE purchase program was obviously priced in.  Obviously.   What we all also knew was the long Dollar, Short Euro trade was very crowded, and wow !!….was that ever nasty when they all moved in the same direction at the same time.  Is the trade unwound at this point ??  No, sir.  Probably a long way to go on that front.  Hearing that quite a few funds are currently in a jam on this one.  Very captivating stuff.  Kind of rots when traders of all types need to raise cash levels in a hurry.  Think crowded subway platform, your train is closing the doors.
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What Matters Today
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                         Two things are front and center this morning.  The “all important”  November Employment Situation, which is in all honesty….probably the least important BLS Employment Report that we have seen in quite some time.  Huh ??  What I’m trying to convey here is that Janet Yellen seems committed to a lift in the Fed Funds Rate on the 16th.  Most of her gang of traveling gypsies also seem to be on board, or at least the doves are piping down a bit.  All of that means that if today’s report is anywhere from decent to good, well then, it doesn’t matter as far as monetary policy goes.  in fact, I’ll go as far as to say that even if today’s print looks awful, but they can somehow, in a half-axxed way explain it, then it still won’t impact that next policy decision.  Think “transitory”.
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                         That leads us up to the OPEC pow-wow in Vienna.  Black gold, oil that is…yeah you know the rest.  With the membership of the cartel apparently at odds of how to proceed, and how to compete with non-OPEC oil producers, this meeting has taken on real significance.  My feeling is that Saudis play ball the way the Saudis need to, and concede very little to the rest of the group.  That would be a negative for Crude.  The knuckleball here is that $40 level for WTI.  This is obviously support, and it is also a somewhat crowded short position that was only partially squeezed out two weeks ago when we had that mini-run.  If $40 cracks, there should be some more support at $38/39.  Then it gets ugly, possibly quickly.  Then again, if there is compromise, you’ll get another short squeeze.  I promise…this will hold your interest.  More fun than a barrel of…..monkeys.
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The November Employment Situation
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Non-Farm Payrolls: October printed at a very strong 271K, after a boost by the birth/death ratio adjustment.  Wall Street is looking for something close to 197K this morning, which is pretty much smack dab in the middle of the range.  A print like this would not change anybody’s mind about anything.
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Unemployment Rate:  You guys know that I have no respect for the validity of this number.  It is no longer meaningful, and nobody trades off of it.  Gallup reported the Unemployment Rate at 5.7% just yesterday.  Shhhhhhh.  Those with something to sell the public will focus on this print if it moves in the right direction.  In all truthfulness, an increase here due to an increase in participation would be a positive.
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Average Hourly Earnings:  This item was quite simply the most encouraging piece of the October release, gaining 0.4% m/m.  After so long, a healthy number in that space was, oh so welcome.  Today, projections are for 0.2% m/m.  Anything above that, will again get some folks all fired up.
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Participation Rate: ……and this is perhaps the most discouraging slice of the pie.  The number came in at 62.4% in October, and most economists expect this data-point to remain at such unhealthy levels.
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Central Bankers
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             There are two central banking shindigs that you want to be aware of today.  The Philadelphia Fed is hosting  a forum on “The New Normal for the US Economy”, and there’s a square dance or something to that effect going on at the Economic Club of New York.  there are some big shots making appearances at both events throughout the day.  Here’s a list of speakers, so that they don’t sneak up on you.
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10:15……….Philadelphia Fed Pres. Patrick Harker makes the opening remarks from Philadelphia.  Harker is not a voting member of the FOMC.
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12:00……….NY Fed Pres. “Wild Bill” William Dudley speaks in New York.  Dudley as the honcho at the NY Fed is a voting member.
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15:45………..St. Louis Fed Pres. James Bullard speaks on monetary policy in Philly.  Bullard will have a vote in 2016, so he does matter.
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16:10………..Minneapolis Fed Pres. Narayana Kocherlakota speaks on monetary policy from Philadelphia.  Not meaningful.  Kocherlakota is a perma-dove, and is leaving his post soon.  Minneapolis does not vote until 2017.
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17:10………..Whoa !! Who let this guy in ??  ECB president Mario Draghi speaks in New York.
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Sarge’s TREADING LEVELS
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SPX: 2077, 2070, 2063, 2052, 2042, 2035, 2026
RUT: 1187, 1182, 1178, 1172, 1168, 1164, 1160.

Market Recon Thursday

Good Morning,
                        Although, there clearly was already a lot on our plates today, as there has been all week,  it really is tough to write about business, and economics on a day like this.  I mean I’m sick to my stomach over the shooting in California.  I’m sure you are too. Evil exits, folks.  Plain and simple.  Evil exists, but so does goodness, and purity.  Never be afraid.  They can hurt you.  They can kill you.  They can never take your soul, and only you can lose your honor.  Now, say a prayer for the victims, and their families.  Then say a prayer for the first responders.  Lastly, say a prayer for our enemies, for it is they who need it the most.  Let’s get moving.
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Plate Spinners, and Fire Twirlers
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               The ECB policy announcement is made public today at 07:45 ET, and Mario Draghi’s press conference begins at 08:30 ET.  At least intellectually, this is probably the most interesting thing that will cross in front of us today.  Odds are that Mario and the gang will step to the plate trying to hit a five run homer.  Well, this is Europe, so they’ll try to score twice on a free kick, or something like that.  The point is that European inflation numbers disappointed just yesterday.  On top of that, ECB officials have allowed markets to absorb the idea of more stimulus, and our boy, Jens Weidmann, the honcho over at the Bundesbank (and an economic bad a$$ at that) is only one vote in 25, and hasn’t been heard from publicly in like two weeks.
               They have three ways to go as far as I see it.  They can add muscles (increase the size of their QE program). They could add duration  (Open ended seems fairly smart to me).  That would be non-committal, and probably not tick anyone off.  Lastly they could cut their discount rate further into negative territory than  it already is.  Last one seems like the one they could leave out in my opinion.  Might want to leave something in your back pocket.  Just sayin’.
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American Pie
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08:30 ET
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Initial Jobless Claims (Weekly):  There has been almost no give and take in this one.  It prints in a narrow range, and only seems to trend lower over time.  Today’s range is the tightest that I have ever seen for Claims (and I pay attention), spanning just 4k, from 266K to 270K.  The four week moving average currently stands at 271K.
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Fed Speaker:  Cleveland Fed Pres. Loretta Mester, remarkably will bat lead off at the Cleveland Fed’s  Financial Stability Conference….. in Washington, DC.  Can’t make this stuff up.  Maybe next year, I’ll host the Guilfoyle Thanksgiving dinner at the Newton house.  Hi Mark.
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Markit Services PMI (November final): This little guy flashed at 56.5, so that’s our expectation for today.  If a tree falls in the woods, and nobody’s around to hear it……. yeah you know the rest.
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10:00 ET
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Fed Speaker:  Federal Reserve Chair Janet Yellen will testify before the Joint Economic Committee .  The topic…. monetary policy.  Just don’t let her use the terms “abrupt tightening”, “overshooting goals”, and “disrupting financial markets”.  Scared the daylights out of some folks yesterday.  Overshooting 2% inflation in a lightning move scares the guy writing this note.
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ISM Non-Manufacturing Index (November):  Our service sector has been in a continual state of expansion since December of 2009, or in layman’s terms….about two weeks after the cows came home.  Not a bad streak at all, and one spot in the economy that even “les miserables” (self included) haven’t been able to harp on.  Today’s expectation is for a 58.1 tag, which would be below the 59.1 pace seen in October.  This data-point can move the market, but not when it’s up against the Empress.
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Factory Orders (October):  Though somewhat dated, we do expect a rebound in Factory Orders of something close to 1.0% m/m.  This would come after back to back months of contraction in August & September.
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10:30 ET
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Natural Gas Inventories (Weekly):  Supplies of Natural Gas have expanded now for 34 consecutive weeks.  After yesterday’s Oil number, those inventories have expanded now for just ten straight weeks.  Same little birdie that incorrectly predicted contraction yesterday, expects to see it again today.  Poor little birdie.
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12:30 ET
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Fed Speaker:  Federal Reserve Vice Chair Stanley Fischer, like the regional President will speak on financial stability at the Cleveland Fed’s Hoedown in Washington, DC.  Should be a knee-slappin’ good time for all.
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Sarge’s TRADING LEVELS
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SPX: 2106, 2098, 2092, 2085, 2077, 2069, 2063
RUT: 1212, 1205, 1201, 1197, 1191, 1187, 1183
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P.S….. $40 Oil sure is a tough nut to crack, ain’t it?