KWN is releasing an interview with David Stockman today, but first here are two legends in the business discussing the action in the markets.
First, a portion of today’s note from Art Cashin’s: The Fed Minutes – Redux – With virtually all the pundits assuring us that a December hike is a “lock”, I thought we should re-examine the key paragraph in the Minutes. Here it is:
During their discussion of economic conditions and monetary policy, participants focused on a number of issues associated with the timing and pace of policy normalization. Some participants thought that the conditions for beginning the policy normalization process had already been met. Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting. Nonetheless, they emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period. Some others, however, judged it unlikely that the information available by the December meeting would warrant raising the target range for the federal funds rate at that meeting.
So, we see that “some” (not a majority) members think the economic conditions are “already” strong enough to call for a rate hike. Then we see that “most” (a majority) believe that conditions “could” improve enough by the next meeting to allow for a hike. Looks like still data dependent to me.
Overnight And Overseas – Option Expiration day here in the U.S.
Asian markets were all higher but most moderately so. The standout was Hong Kong up 1.13%.
European markets are mixed with France a bit shaken by a new terror attack in their former colony of Mali.
The euro and crude are a bit softer, while gold is up a little as are yields. U.S. stock futures are mixed to slightly firmer.
Consensus – Expiration will be a factor and traders will look to see if crude regains its influence on equity markets. Market is a shade overbought but we may be about to shift to a Thanksgiving lethargy period. Stay wary, alert and very, very nimble.
From Jeff Saut’s note: “Recently I watched a WW2 movie drama, produced within the past few years, where one of the soldiers yelled, ‘Incoming!’ to warn his colleagues about incoming enemy ordnance.”
“Incoming” is a term I first heard in my days at Camp Pendleton to warn us about “incoming ordnance.” However, yesterday it was “incoming” into my email box sparked by the reference to Tuesday’s New York Stock Exchange’s (NYSE) blurb about the cessation of executing “Stop Loss” and “Good Till Cancel” (GTC) orders on the NYSE. As stated in yesterday’s Morning Tack, “While I don’t personally use them, I always have a mental ‘Stop,’ or ‘uncle point,’ for any investment position in an attempt to avoid the big loss. As it turns out, the NYSE wants to eliminate Stop Loss and GTC orders because they think such orders had a lot to do with the ‘flash crash’ of August 24, 2015. I don’t know if this will go down in the annals of stock market lore right up there with the wrong-footed elimination of the uptick rule, but it certainly could come close.” I had no idea how many Raymond James Financial Advisors actual use “Stop Loss” orders, but evidently it is legion. So, for the record, my trading desks tell me that Raymond James (as a firm) is going to continue to honor “Stop Loss” and GTC orders after the NYSE’s drop-dead date of February 26, 2016. Enough said!
Turning to the markets, I found this very interesting from the erudite Peter Boockvar at the Virginia-based “The Lindsey Group.” To wit, “With markets about 24 hours past the release of the minutes from the September FOMC meeting that reminded all that December is highly likely when we’ll see a rate hike, the 2s/10s spread today is narrowing to the lowest level since April on a closing basis at 136 bps. It was at 141 bps before the release of the minutes. It widened to 151 bps on September 17th, the day the Fed chose not to raise rates. . . . If the bear flattening from here forward continues, it will say a lot about how the Treasury market thinks the US economy can handle rate hikes.” Well said, Peter, and obviously the equity markets have listened to the message of the 2 to 10 spread between the Tnotes. So where does this leave us regarding stocks? Well, I will go with what I said yesterday:
Speaking of meltups, that was pretty much what we had from the September 29th retest of the August 24/25th “crashette” lows in what the astute Lowry’s organization termed a “lockout rally,” meaning there were no pullbacks, effectively giving the “want to participate” crowd no comfortable place to “buy.” The question today is, “Have we begun another ‘lockout rally’?” Regrettably, I just do not know, but it sure feels like it. That view will be reinforced if the SPX can travel above its intraday high of 2116.48 recorded on 11-3-15. . . . I will note that the stock market’s internal energy is totally used up on a short-term basis, so after an upside burst this morning there should be some kind of pause before stocks trade higher.
Almost on cue, yesterday’s stock market certainly constituted a “pause” and will likely do so again today since there is a tendency to pause on option expiration days. However with ECB President Mario Draghi speaking today, Europe could gain some traction since the Paris tragedies give him a lot of cover to “hit” the liquidity accelerator even harder.
***ALSO JUST RELEASED: Jim Brown And Art Cashin – Carnage In Commodities Has Prices At 40 Year Lows! CLICK HERE.
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