Oil Weakness? Is it Supply or Demand?

Stocks were mixed on Monday putting in a lackluster performance – nervous selling in the high growth names – Nasdaq & Russell – being blamed on none other than the FED press conference on Wednesday. This does make sense – because when you look at the performance – Nasdaq has been outperforming the broader mkt – up some 10% going into yesterday – so if traders are becoming a bit edgy – where is the most likely place to raise cash? In the names that could suffer the most in a surprise.

Again – the nagging question remains – What will Janet do? Now the sense from so many is that she will hint at moving rates up to maybe end of 1Q – so March vs. May/June…. I still don’t buy it….she may hint that IF she sees continued ‘strength’ (show me where) then that could be true – and if not then not. That’s like the analyst that says – “well yes the mkt can go up and it can go down…”

The central bank of all central banks – The Bank of International Settlements (BIS) has been warning about too much liquidity for a while – on Sunday Claudio Borio – Head of its Monetary & Economic Unit reinforced that view saying that:

“Loose monetary policies have created an illusion of permanent liquidity that is spurring investors to make risky bets and push up asset prices, The longer the music plays and the louder it gets, the more deafening is the silence that follows. Markets will not be liquid when that liquidity is needed most”

What nobody wants to do is give the impression of permanent liquidity due to accommodative global monetary policies – and this continues to be the concern simmering under the surface as central banks keep supporting the mkts. So – the speculation is that the FED will change the language allowing for broader interpretation – but I still say that until the economy demonstrates more strength- I do not see how the FED can really raise rates sooner than May/June.

Another continuing story was the drop in energy prices – Brent Crude dropping to $97/barrel (a 15% drop from the June highs) is the lowest in 2 yrs. WTI (West Texas Intermediate is at $92.60 or a 14% drop from the June highs) But what is interesting during this pullback is that energy stocks have not fallen apart – which just might indicate that the mkt is not expecting a collapse in energy prices. Is this just a simple supply/demand conversation? Aren't lower oil prices good for the economies and consumers? Well, yes - UNLESS prices are lower because economies are in the trash - not creating demand, not producing, transporting, or shipping manufactured goods. Then NO....because it then speaks to a much broader problem....so which is it? Supply OR Demand?

But clearly China - the 2nd largest economy in the world - has been a bit of a concern. They are the world's biggest energy consumer - so investors react to the data - maybe a bit too much - but they do. We can't really tell if the data is all accurate - they tell you what they want you to hear.....(Well isn't that a kick in the pants...sounds like so many other nations.....)

Over the weekend we got more mixed data out of this giant. Ind Production fell to its lowest level since the beginning of the crisis - Factory orders did rise 6.9% but that was well below the 8.8% expectation. But I do not believe that China is circling the drain at all.....take a look a their stock market - it just keeps going up in the face of all this bad data - is the mkt telling us that the data is suspect or does it see better days ahead?

Technically, the stock market is in a corrective mode. Keep your eyes on the Russell 2000 index which broke below both its 50-day and 200-day moving averages now heading towards a ‘Death Cross’ – that is when the 50 crosses down and through the 200 dma – suggesting underlying weakness. Will the broader mkt reveal the same concerns?

US futures are down by 2 pts this morning as they want to test the 50 DMA at 1970 ish. We closed at 1984 - have tested 1980 - 3 times in the past 7 days.....the bears have been unable to break it.....but if they do - then a move to 1970 ish could be swift. Look for that test possibly today as everyone positions themselves ahead of the FOMC. Resistance remains the century mark - 2000.

Eco data today - PPI exp of 0%, Ex food and energy +0.1%.

Overnight in Asia – mkts were mixed as those investors await the key events later this week. Trading in Hong Kong was cancelled in light of Typhoon Kalmaegi. Japan -0.23%, China -1.82%, and ASX -0.51%.

In Europe –The Scottish vote for independence happens on Thursday - the scramble is on and with just 3 days until the vote - the polls are showing a narrow NO vote lead. FTSE -0.46%, CAC 40 – 0.53%, DAX -0.42%, Eurostoxx -0.46%, SPAIN -0.50% and ITALY-0.42%.

Ratatouille

It's time again for some Ratatouille - Fall is coming and this is an easy yet hearty dish to make.

Ratatouille - (Rat - ta - too - ey).....comes from the French word - Touiller - meaning to "toss food".......because when you make this you - literally "toss" it all together.....now this can be a side dish, or a main dish...you can serve it over Pasta or Rice - you can even use it as a stuffing in a pastry type filo dough. It is a great fall kind of "stewy" meal.....thick and delicious yet not overpowering at all.

Key Ingredients - garlic, onions, zucchini (green and yellow), eggplant, bell peppers (green, red and yellow), carrots, celery, basil, crushed tomatoes, s&p, oregano and olive oil.

Peel and cube the eggplant – layout on paper towels on the counter for about 30 mins or so…

You can also slice the onions, peppers, chop the carrots and celery and cube the zucchini – set aside.

Begin by heating up the olive oil - about 1/2 c or so.....now add the crushed garlic and sauté for a bit.

Next add the onions and sauté until translucent, now the peppers, carrots and celery – continue to cook on med heat….until they feel soft – about 15 mins or so…..finally add the cubed zucchini and eggplant – mix well and season with s&p. Cook for another 10 mins or so…..now add a can of crushed “kitchen ready” tomatoes – NOT PUREE. (Depending on how much you are making you may need two cans of tomatoes). Now add fresh basil, a bit of oregano and cover – allow to simmer for about an hour – while stirring occasionally.

Feel free to taste in case you need to adjust the seasoning. At this point the Ratatouille is complete. You decide how to serve it – over pasta? – Make sure to have fresh grated Parmegiana cheese! Over white rice? As a main dish? As a side dish? You cannot go wrong!


Buon Appetito.