WASHINGTON, March 14, 2017 – The icy winds are howling outside the Maven’s townhouse in Reston, a Virginia suburb of Washington, D.C. But roads appear to be cleared already, unlike today’s Wall Street action in blizzard-plagued Manhattan, a storm, which the always-looking-for-viewers Weather Channel insists on naming Winter Storm “Stella.” (Hell, these aren’t hurricanes, guys.)
Market averages Tuesday have assumed that usual sickening downward spiral that greeted the Trump Rally in March, and the action threatens to cut the rally down to size, at least somewhat. As of 3 p.m. ET, the Dow is off about 38 points (-0.19 percent), the S&P 500 is down 8.9 points (- 0.38 percent) and the tech-heavy NASDAQ has fallen a bit harder, off 23.20 points (-0.39 percent). bad
The past two weeks, quite frankly, have put us back into one of those “Waiting for Godot” moments we’ve often experienced over the last 8 years of Obamanation. Confused markets don’t know which way to go and it shows.
A good deal of the negative action lately has been in the oil patch. After a joyous Happy Dance over crude oil’s price rebound to over $50 bbl., crude has been sinking again, reviving fears of that commodity’s not-so-long-ago swan dive into the mid-$20 range. More likely, though, is the fact that the oil bulls drove the price of crude too high too fast. Now, due to continuing reports of a vast oversupply of crude, they’re dumping contracts like there’s no tomorrow, committing what’s likely the equal and opposite effect.
On the other hand, lower prices at the pump for the consumer can’t be all bad, as Stephen Green tells us via Instapundit, referring to a Reuters article on recent oil surpluses:
“HAVE YOU HUGGED A FRACKER TODAY? Oil touches three-month lows, as U.S. supply swells.
“[Reuters:] The price has fallen by more than 8 percent since last Monday, its biggest week-on-week drop in four months, and analysts said the slide may not have much further to run.
“‘The market is bearish because sentiment has turned. The risk is still towards the downside, but we are nowhere near the precipice,’ PVM Oil Associates Tamas Varga said.
“Goldman Sachs said in a note it remained ‘very confident’ about commodity prices and maintained its price forecast of $57.50 a barrel for WTI in the second quarter.
“U.S. drillers added oil rigs for an eighth consecutive week, Baker Hughes said on Friday, lifting spending to benefit from an earlier recovery in crude prices since the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut output.
“OPEC and other major oil producers including Russia reached an agreement late last year to rein in production by almost 1.8 million barrels per day (bpd) in the first half of 2017.
“Although OPEC states have been complying with supply curbs, led by Saudi Arabia, it has not been enough to overshadow a rise in U.S. inventories to a new high.”
Comments Green on this report:
“I had been assured by no less than the (former) President of the United States that we “‘can’t just drill our way out to lower gas prices.’”
“What a noob.”
[He’s referring to the Lightworker, BTW, our beloved and blessedly former President.]
“But if we really want lower gas prices, let’s open another oil refinery or two and do something about the country’s crazy patchwork quilt of gasoline blends.”
We’d agree. But the oil market is scared right now and fixed on other things. This, added to the knee-knocking fear the market seems to be experiencing over the Fed’s likely announcement of an interest rate increase of 0.25 percent at approximately 2 p.m. Wednesday, has made for a swamp of misery for hedge funds and individual traders alike.
As you can see in the chart below, our beloved McClellan Oscillator took a nice jump out of extreme oversold conditions on Monday.
Far from bringing joy and happiness Tuesday, however, that jump seems to be a fading memory as markets are looking down again. Perhaps the Oscillator will experience kind of a double bottom today or tomorrow, igniting perhaps a better rally than the pitiful ones we’ve seen in March thus far.
We’re just going to hang in there for now, as any move in a situation like this might be the wrong one. But we’d look for some kind of significant market bounce, and soon. Often times, the actual announcement of a Fed interest rate increase will induce some kind of relief rally either on the day of the announcement or a couple of days thereafter. We’ll wait and see. Maybe Godot will actually show.