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Morning Commentary

Building Base for Next Leg Higher

By Charles Payne
7/10/2017 8:32 AM
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The market continues to spin its wheels, but there is something going on here that bodes well for all the major indices.  It’s called consolidation of gains.  Fast money has sloshed around, rotating from one sector to another, particularly into financials and out of technology. However, the tech rally isn’t over as the financial underpinnings are only going to become stronger.  

Before talking fundamentals, let’s point to the technical development that hints at a near-term breakout.  These sideways consolidation patterns can last for several weeks, but a breakout will result in a move of no less than 1,000 Dow points.  The next breakout comes with a close above 21,600.  Riding the momentum of another strong jobs report could make this possible early in the week; although it’s more than likely that better-than-expected results from an array of banks on last Friday might be needed:

I also like that Friday saw technology, banks, and consumer discretionary names all higher.  Consumer discretionary was led by homebuilders. We are working on an industry paper that should be ready tomorrow morning.

Meanwhile, another wild card could come from the oil patch after reports that Kuwait’s Oil Minister has requested both Libya (one million b/d) and Nigeria (500,000 b/d), to lower production. For the latter, it comes as production is at its highest level in four years. I was surprised to see West Texas Intermediate (WTI) not hold above $45.00 last week on those massive drawdown numbers, but a sharp increase in rigs derailed its momentum.

I’m not concerned with natural gas rigs, but seven more oil rigs put the count to 763 from 351 a year earlier. This time, it wasn’t Permian Basin (PBT) driving oil rigs higher; in fact, the hottest crude patch in the country has been flat for five weeks. Still, there is a delicate balance between allowing prices to edge higher and taking advantage of OPEC’s waning influence. 

If crude begins to rally in the second half of the year, it’s going to help the Dow move to a significant leg higher.

Today’s Session

We begin today with all eyes back on Washington, D.C., where healthcare has been thrusted back to the forefront.  However, it starts with the handicap of previous failed efforts and a sense that key players are already tossing in the towel.

Arizona Senator McCain wants his party to allow Democrats into the process with amendments otherwise its “dead,” while Louisiana Senator Cassidy simply doesn’t think the plan or potential rewrite is “serious.”

Republicans could do themselves a favor by working hard and articulating a tax cut plan, not to be confused with full-blown reform, but something that could pass immediately and break the logjam.   Success begets success while fumbling and poor execution create its own gravy not unlike a blackhole.

Republicans were pushing for tort reform and buying healthcare across state lines when the Democrats were trying to pass Obamacare. We need a bill to make healthcare plans competitive among healthcare companies. Until we get competition healthcare should go nowhere!

Charles Mansur on 7/10/2017 1:27:37 PM
And, be able to buy flexible policies with the coverage we as an individual deem appropriate for ourselves and situation. It seems apparent the Democrats and Progressives will only accept Big Brother mandated health insurance which everyone knows distorts markets, adds inefficiencies and layers on red tape and bureaucracy.
When they repeal their own insurance programs and join the free market I will listen but, until then they ( politicians) do not exist for me.

Garro on 7/10/2017 5:14:35 PM
Repeal----Roll Back To 2009---- LET THE CHIPS FALL WHERE THEY MAY--------THE able dependent are robbing themselves of of a meaningful LIFE when they depend on gov. [ and rob medicaid ( meant for the people who can not do anything for themselves) and putting their OWN NATION on the path along with VENEZUELA.

john on 7/10/2017 5:33:48 PM

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