Submitted by Eric Bush via Gavekal Capital blog,
Most of the time not a whole lot actually changes in the markets over the course of a month. For example, small cap stocks tend to outperform large cap stocks by a rather mundane 31 bps over the course of a month on average going back to 1996. There are, however, periods of time when extreme moves do occur over the course of a month. We have just experienced one of those times.
Following a dramatic surge in US oil rig counts the last two weeks, Baker Hughes reports oil rigs rose once again (the 28th weekly rise of the last 30) by 13 to 523 - the highest since the first week of January 2016.
The oil rig count is tracking the lagged oil price perfectly still...
US crude production looks set to continue to rise - tracking the lagged rig count rise - much to the chagrin of the Saudis...
There was no reaction in crude futures prices at all.
By EconMatters
We discuss several markets including: oil, heating oil, gasoline, VIX, stock futures, and natural gas for the trading week in this video. Will we get a pick up in the VIX the last week of the trading year for 2016? At some point the bad Donald Trump ideas and market ramifications of Trump Policy are going to have to be priced into financial markets.
https://www.youtube.com/watch?v=ZPy_Lqx-LBE
With fears mounting over China's debt load sustainability, and amid yet another liquidity crisis, President Xi Jinping appeared to admit that China's economic growth will slow below the government’s 6.5% target. Despite the promise of creating a "modestly prosperous society," Xi warned that China doesn’t need to meet the objective if doing so creates too much risk - a little late for that after trillions of freshly created credit was spewed into zombified firms this year - but at least reality is starting to set in.
The markets have begun to turn.
Sure… the broad indexes like the Dow and the S&P 500 are holding up…but beneath this surface, BAD stuff is brewing.
Copper, which lead stocks to the upside during this latest rally, has already TOPPED and is now correcting.
This is a key “tell” and it’s telling us… point blank, that the “growth” trade that hit post November 8th is out of steam.
We get additional indicators from the inflation trade (TIPS/ Long-Term Treasury ratio) which peaked December 12 and is now on the cusp of taking out its trendline.