Market Recon Tuesday

Good Morning,
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Tightening Cycle.
                        Today will mark the return of Fed Speak as a threat to the marketplace, as we’ll hear from two voting members of the FOMC currently filling slots with permanent voting rights. We keep hearing that the “WIRP”, or the probability of an increase in the Fed Funds Rate at the December meeting culminating on 14 December is 100%. The CME website also tracks this data. The CME is reporting a “mere” 94% chance. Regardless, what I think is far more interesting than trying to figure the odds of an increase at this meeting is that, at least according to the CME, there is close to a 19% chance of a second hike by the (Ides of) March 15th meeting. FYI, there is no January meeting this year; the first policy announcement of 2017 will come on 1 February. By then. some of this year’s leading hawks will have left the committee to be replaced by seemingly more dovish crew. Seemingly, with a new administration in place.
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Dollar / Oil / Energy.
                       The US Dollar is gaining some strength today, negatively impacting gold, and oil in the early going. Of course, there are other factors slapping oil around. For one, energy traders are again starting to doubt OPEC’s ability to even put together a meaningless agreement filled with exemptions for multiple members. (These guys are even more entertaining than academics playing the role of central banker) That said, the energy sector appears to have been ahead of the game yesterday, but the game is not over. Before tomorrow’s meeting comes to a bone jarring end, expect to see both elation, and disappointment as speculation, and manipulation run rampant. I wouldn’t even trade the space over the next two days, unless I was 100% okay with being wrong. This is not something you bet the tuition on.
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The College Football Playoffs.
                        Was it a first down? It really didn’t look like it to me, but it was razor close, and even on replay….still too close to overturn. I am not here to plead anyone’s case for playoff inclusion, at least not anyone currently in the top ten. Has anyone taken a look at Western Michigan? I know, I know… they play in a lesser conference. So what? These guys are 12-0, and are mired way back toward the back end of the top fifteen, surrounded by teams with two or three losses. This Western Michigan team still has a conference championship game to play. What if they win that game, and win a bowl game.  Is there going to be a 14-0 team filled with over-achieving, probably under-recruited kids left out? This is where big time sports fails the little guy. Maybe they don’t really belong in a final four playoff. Maybe they get crushed. Maybe, just maybe they don’t. They deserve the chance to be beaten on the field.
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Publishing Note: Don’t forget, we’re moving over to TheStreet on Thursday.
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Macro
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08:30 – GDP (Q3-rev): Expecting 3.0%, Q3 adv 2.9% q/q SAAR. In the advance release, Q3 showed significant improvement over Q2, at least at the headline. The oddity, at least to me, was that Personal Consumption Expenditures (the strength of that weak second quarter) put it’s second worst quarter in two and a half years to the tape. The strength in this report came from Durable Goods (two straight), and Exports (which came out of nowhere), namely agricultural (soybeans) exports. The expectation for today is that these strengths will not be revised lower, and the report will not be hurt by Gross Domestic Income, which we have not seen yet. A significantly downward revision could change market sentiment, based on the Fed’s ability to carry forth with their intent.
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08:55 – Redbook (Weekly): Last Week 1.0 y/y. This item may get more notice than usual today. Black Friday numbers came in a little sloppy for many brick and mortar retailers. When measured year over year, this item has been on the rise since early October, and like I always tell you… this number stays above 0.5%, and nobody will focus on it.
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09:00 – Case-Shiller HPI (September): Expecting 5.2%, August 5.1% y/y. This data is sliced and diced several different ways. For example, home prices out west have outperformed all year, while the northeast has continued to struggle mightily. The headline number is the one that the marketplace will notice. That specific item has seen it’s growth stall in the low to mid 5% range, but it is still growing steadily. HPI’s are not a game changer for equity markets, but are on that next level as far as sentiment goes.
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09:15 – Fed Speaker: New York Fed Pres. William Dudley is set to speak on Puerto Rico’s economic situation from San Juan. Dudley is a permanent voting member of the FOMC, who has made an effort to prepare markets for a hike in the Fed Funds Rate in two weeks. he will open himself up to a Q&A session after this speech.
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10:00 – Consumer Confidence (November): Expecting 100.8, October 98.6. Consumer based surveys always have the potential to move markets. This one missed in October after significantly out-performing both it’s own expectations, and the U of Michigan’s Consumer Sentiment numbers for several months prior. That Sentiment print absolutely popped on Wednesday, and we look for a Trump rally inspired boost in confidence here today as well.
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13:40 – Fed Speaker: Federal Reserve Gov. Jerome Powell will speak on the outlook for the US economy to the economic Club of Indiana. Powell is a permanent voting member of the FOMC, and spoke two weeks ago on the prospects of a potentially tougher environment for international trade going forward. Powell will answer questions after this speech.
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Sarge’s Cash Levels
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SPX: 2224, 2215, 2204, 2194, 2187, 2180
RUT: 1349, 1339, 1332, 1327, 1319, 1314
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Tuesday’s Earnings Highlight
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Before the Open: TIF (.67)