Meng Makes Bail, Xi Cuts Autos Tariffs, US is World's Largest Oil Producer and Markets Surge

The mkts whipped around on Tuesday – beginning the day strong surging ahead as positive news over trade set the tone with Donny saying in his twitter"Very productive conversations happening around trade' .........only to get blindsided by a meeting in the oval office – that was broadcast across the airwaves that showed Donny (Trump) and Mikey (Pence) along with Nancy (Pelosi) and Chucky (Schumer) having an argument over funding for the border wall – the back and forth was ridiculous and the whole spectacle allowed the world to see how dysfunctional it all is....threats of a gov't shutdown (a negative that offset the morning's positive) causing the angst yesterday.....sending mkts reeling –

The Dow went from + 368 pts to -208 pts or a swing of 586 pts from hi to lo while the S&P went from + 37 to -16 or a 53 pts swing and the Nasdaq surged by 109 pts only to fall into negative 37 pts or a 146 pt swing from hi to lo...... ..... by 2 pm the euphoria that had gripped the mkt was gone and it was the same story yet again.....accentuating the negatives while eliminating the positives as the mkt struggled – with the S&P attempting to hold onto the 2635 range – a level where it has seemed to find support over the past 2 months...The last hour of trade saw the mkts attempt to rally again only to be hit by selling as the trader types are using any and all swings in the mkt to try and ring the cash register......by 4 pm – the Dow ended down 53 pts, the Dow Transports gave up 45, the S&P landed on the flat line, the Russell Small Cap/Mid Cap gave up 3 pts and the Nasdaq tacked 11 pts.

Not to be forgotten – was the BREXIT issue as UK PM Terry May continues to get slammed by the opposition as she tries to file the divorce settlement from the EU – vowing to fight with ‘everything she's got'.....Next up was a Canadian courthouse.....where the media spent time broadcasting the bail hearing for Huawei's CFO Meng Wanzhou's. She (Meng) jumped thru hoops putting up houses, money and giving up their passports to assure the courts that she was not going to be a flight risk – getting herself to China where there are NO extradition laws.....you could feel the tension on the screen as both sides argued for they wanted......in the end the court granted bail but not until after the mkts closed – so there was no celebration.....(yesterday...)

But today is a very different story......Mkts around the world are surging! Rumors that China is going to CUT import tariffs on US autos by 25% (China currently imposes a 40% tariff on imported US autos – 40%!) – which would take their tariffs on our cars down to 15% - and that news sent auto stocks surging......Bo Zhuang – Chief China Economist for TS Lombard told CNBC that Beijing's intentions to cut import tariffs is ‘simply a small step in de-escalation' ......then Donny suggested that he is prepared to intervene on behalf of Meng IF it helps the trade talks move along....investors in Asia are giddy with excitement....and they hit the BUY button on their computers sending stocks higher..........Japan closed up 2.1%, Hong Kong surged by 1.6%, China moved higher by 0.35% and the Aussies added 1.4%....

In Europe mkts there are responding the euphoria as all are up better than 1% as word about a possible US/China deal permeated the news feed......but don't be so quick to just hit the BUY button with abandon.....Look – PM Theresa May is about to face a vote of confidence ( or maybe NO confidence) on Wednesday evening.....as the political turmoil deepens....as she fights hard to save herself and her BREXIT deal.......The threshold of support that she needed to trigger a vote of confidence was finally reached on Tuesday evening and the vote is set to take place today between 6pm – 8pm in London or 1 pm – 3 pm EST......and while the expectation is for a vote of confidence (and that would be a positive) – anything could go wrong......As noted mkts are higher with the FTSE + 1%, CAC 40 + 1.66%, DAX + 0.84%, EUROSTOXX + 1.17%, SPAIN + 0.74% and Italy +0.73%....

And US futures are happy once again......Dow futures are up 176 pts or 0.72%, S&P futures are ahead by 20 pts or 0.76% and Nasdaq futures are up over 1% at +72 pts. The positive headlines are causing the algo's to trip over each other as they attempt to scoop up any low hanging fruit that might still be available....in the pre-mkt session.....and while it feels good right now – remember – the mkt is extremely sensitive to any headline at the moment – much more so than it should be – but that is a direct result of the beating it has taken over the past 2 months....the technical break in the mkt, the breaching of all 3 levels of support across all the indexes has caused untold technical damage that needs to be repaired...and this will take a bit of time....but like I said and have been saying – the swift moves lower have caused some pain but they have also created some longer term opportunities. This is not the time to bail - it is a time to speak to your advisor and pick up some names that will add to your well diversified portfolio. Value is the play going into 2019 and there are plenty of value type names out there.

I believe that we remain in the 2625/2700 trading range......and 2700 is not anything other than a big round number that has been both a level of support and resistance – but when you are coming at it from below....it is resistance....the mkts will focus on the headlines.....so like yesterday – the tone can change from min to min depending on who's doing the talking....for now – it appears that we are moving in the right direction on trade and that is key....next up is the FED's FOMC announcement next week....and while the expectation is for rates to rise by 25 bps......Donny continues to express his displeasure with that decision and can't help himself...as he calls on Papa Jay (Powell) to back off! My guess is that Jay does not – and that rates will rise in December – while leaving the door open for modifications in 2019.....remember that one of the FED's concerns was an ongoing and long drawn out battle between he US and China that would cause him to back off on further rate increases.....but if that problem is solved and everyone plays nice in the sandbox – then expectations for a rate rise will change once again.....just sayin'

Oil is up by 1% - as the mkts now appear to be ok with the OPEC/Saudi cuts and think that they will in fact do the job of re-balancing supply and demand...now that is funny because yesterday -the same analysts thought that it would NOT do the job and oil sold off......and so you have a true mkt – some say yes while others say no......as each side battles for the microphone......

Remember – the US is set to end 2018 as the world's TOP OIL PRODUCER......is that clear? We are now at the top of the pile producing some 10.8 mil barrels/day.......– ahead of the Russian's and the Saudi's. Fawad Razaqzada – mkt analyst at Forex.com tells us that "US oil production growth continues to relentlessly and will probably continue for the foreseeable future to offset ANY supply-side adjustments from OPEC+ group". So – really? Where is oil going? $100 like the guys at GS told us only 3 months ago....doubtful! WTI remains in the $50/$55 range and unless OPEC et al really cuts production – why would it really trade much higher at the moment?