Market Recon Wednesday

Good Morning,
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The Elephant in the Room.
                       OPEC Secretary General Mohammed Barkindo got this party started early, apparently stating that a deal would in fact, get done today. Add to that some positive comments from Bijan Zangeneh (Iran’s Oil Minister), who had not been extremely cooperative in the past, and voila !! Crude prices were off to the races, reclaiming levels not seen in over 24 hours. (Oooh!!, Ahh!!) Scuttlebutt has it that a production cut is being bandied about that would exempt both Nigeria and Libya, and that the cartel is in contact this morning with non-OPEC producers, whose level of participation is unknown (at least by this guy) at this time. What is also unknown would be the exemption status of Iran, a nation that was rumored to be in line for such a benefit back in September. The bottom line, gang… is that there’s a lot of pressure here to get something done, something that sounds like more than window dressing. This pressure is going to be today’s driver. Without a deal, there is no ability to collude… and there is absolutely no cartel.
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A Lot on Your Plate Today.
                      As you lift that pretty head of yours off of the pillow this morning, you’ll soon realize that there’s a ton of macro-economic data on your plate today. If you read me, you know I have been skeptical of this economy every step of the way, but let’s call this what it is. Sure, we can find something negative in most spots if we really try. It’s not really so hard to support an agenda if you have one.
                      Our only agenda, however should be to excel within the environment provided. That environment is different now. It’s not just yesterday’s revision to Q3 GDP, and the Atlanta Fed’s projection for Q4, … it’s both Consumer Surveys, it’s the almost weekly improvement seen in the retail related Redbook, it’s Durable Goods, it’s home prices, and it’s all five major regional Fed district manufacturing prints hitting the tape in a state of expansion, supported by New Orders. Just makes my little heart burst with joy that this all started in an environment less conducive to growth than the one that we appear to be headed into.
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Trader Focus
                       Well, if that whole OPEC shindig, and that plate full of macro isn’t enough to rattle your cage, today is the final day of November. We’ve seen significant movement in just about everything from currency valuations, and yields to the major equity indices … not to mention all of the sector rotation. You’re going to have to deal with the month-end shuffle on top of all of those headline level events as mangers re-balance their books. the good thing is that you probably will not be bored. Go get ’em, gang.
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Reminder: This is the last day that my morning note will be published at sarge986.com  …  Tomorrow we move over to thestreet.com
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Macro
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08:00 – Fed Speaker: Dallas Fed Pres. Robert Kaplan, who will vote on monetary policy in 2017, has joined the chorus of central bankers preparing the marketplace for this anticlimactic rate hike that we’ll see in two weeks. Kaplan speaks this morning from New York City, and will take questions from the media.
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08:15 – ADP Employment Report (November): Expecting 162K, October 147K. The interesting thing here is just how sharp an indicator this item is for the all important Non-Farm Payrolls print. That fact is not readily identifiable to the naked eye upon release, but when smoothed out over time after revisions, the two are nearly identical. The BLS print is much more volatile, which is probably due to the fact that ADP, a corporation is simply more efficient than would be a government agency. After accepting that, over the last ten months, or simply 2016 YTD, Non-Farm Payrolls are averaging 184.5K (with a high of 292K, and a low of 11K), while the ADP number has averaged 182K (with a high of 205K, and a low of last month’s 147K). From a macro point of view, this data-point matters. From the market’s stance, it certainly matters to equity index futures traders, but will be absorbed by the time the 09:30 crowd gets going.
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08:30 – Personal Income (October): Expecting 0.4%, Sept 0.3% m/m.
08:30 – Consumer Spending (October): Expecting 0.5%, Sept 0.5% m/m. Income has suddenly started trending higher. That’s good. Spending has also started trending higher. That too is good. What’s not so hot, is when Income does not keep up with Spending. Income has failed to keep pace in five of the last six months, and as you can see, we are looking for more of the same today. We love an aggressive consumer, I mean who doesn’t?  The best consumer though, is a comfortable consumer, and I do think there is progress. The sub-components of yesterday’s Q3 GDP release support that. If you see side by side strength here today, the markets will cheer.
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08:30 – PCE Price Index (Oct): Expecting 0.3%, Sept 0.2% m/m 1.2% y/y.
08:30 – Core PCE Px Index (Oct): Expecting 0.1%, Sept 0.1% m/m 1.7% y/y.  There should be some movement in consumer based inflation for October, particularly at the headline. The year over year Core data is what market participants will be watching. Regardless of what hits the tape today, I think we all know what’s on the way. That said, you get a Core print above 1.7%, and you’ll get a spark in the markets. this is one of the single most important items in our macro-universe.
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09:15 – Fed Speaker: Federal Reserve Gov. Jerome Powell will speak twice today from the Brookings Institute in Washington. The day’s topic will be “Understanding Fedspeak”. Could have used a speech like this …oh, six or seven years ago. There will be a Q&A session after the speech.
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09:45 – Chicago PMI (November): Expecting 52, October 50.6. Although we have officially stated an expectation for this data-point today, the expectation here is actually quite meaningless.  The last time that the Chicago PMI printed within even 1.5 of consensus view was in August…. of 2015, and on more than a few occasions the miss was enormous. What’s real is the print itself, and we expect to see a sixth consecutive month of expansion in the Chicago region’s business conditions.
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10:00 – Pending Home Sales (October): Expecting 0.5%, Sept 1.5% m/m. This item is considered a leading indicator for Existing Home Sales, as new construction is excluded from the data. Though there is a loose correlation, this remains low on the totem pole for housing numbers as far as market impact is concerned. We expect only small net change for October, which is actually unusual for this volatile series.
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10:30 – Oil Inventories (Weekly): Exp +1.3M barrels, Last Week -1.3M barrels.
10:30 – Gasoline Stocks (Weekly): Exp +1M barrels, Last Week +2.3M barrels. Like the Chicago PMI, this is another space where expectations, and reality often have trouble coming close. The API prints released on Tuesday evenings are usually closer than is professional consensus. API is reporting a draw at the headline of -717K barrels for Crude. As far as Gasoline goes, API printed a 3.36M barrel inventory build. Crude drifted slightly higher last night in response to these numbers, but OPEC clearly will have more of an impact in this space today than will these silly fundamentals.
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11:45 – Fed Speaker: Federal Reserve Gov. Jerome Powell speaks publicly for the second time today, and for the third time in two days. Yes, he is still a permanent voting member of the FOMC.
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12:35 – Fed Speaker: Cleveland Fed Pres. Loretta Mester will speak on monetary policy, and the economy from Pittsburgh. Mester who will vote in December, but not in 2017 has been one of the FOMC most outspoken hawks for most of the second half of the year. Like Kaplan earlier, she will answer questions from the media today.
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14:00 – Beige Book: I don’t think we are on the lookout for anything shocking here today. We all know that this economy finally seems to be improving on several fronts. The surprise would be if anecdotal evidence compiled across twelve regional Federal Reserve districts failed to illustrate that image in the aggregate.
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Sarge’s Cash Levels
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SPX: 2218, 2211, 2204, 2195, 2187, 2180
RUT: 1348, 1339, 1334, 1327, 1319, 1314
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Wednesday’s Earnings Highlights
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Before the Open: AEO (.41)
After the Close: LZB (.38), GES (.14)