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Morning Commentary

Who Breaks The Internet

By Charles Payne, CEO & Principal Analyst
11/21/2018 9:39 AM
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Image result for ralph breaks the internet

Disney’s “Ralph Breaks the Internet” promises to be a smash hit, but many are asking who’s breaking the internet in real life.

High Flying Momentum No More

In just the blink of an eye, the hottest group of stocks in the market have become ice cold as their share prices continue to freefall.   On the way up investors suspended disbelief about everything from valuations to eventual competition.  Now, on the way down investors are just moving out of the way as selling begets selling.

It’s not a laughing matter.  

But how did this happen?

There is a litany of reasons for the grounding of high flyers, but I don’t think these names are down and out, in fact I see most hitting new all-time high levels in the next year.

The question is the ability of investors to handle volatility that could continue, from adjustments in expectations, to implementation of regulations: government imposed and self-imposed.

Crude Reality?

Donald J. Trump

Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!

President Trump gave Saudi Arabia a big shout out this morning for helping to push crude oil prices lower.  There is no doubt Saudi Arabia reacted to persistent demands from the White House to push the price lower, coupled with US production it’s worked big time.

For all the attention given to the selloff in stocks, what’s happening with crude oil has to be chalked up to supply, but the 28% plunge in West Texas Intermediate (WTI) in just one month is remarkable. 

The conventional wisdom on Wall Street was WTI was on its way to $100.  Wall Street was wrong about that, but Wall Street is wrong on so many things.  We knew the global economy was slipping fast, but maybe it’s worse than anyone has modeled, including the Federal Reserve.

If the plunge in crude oil doesn’t get the attention of the Fed, maybe the slouching housing market and spirally stock market will. 

“Recession is so far in the distance I can’t see it”

Larry Kudlow

No America isn’t going into recession unless the Fed pushes us there.

             West Texas Intermediate

https://www.tradingview.com/x/pFEBjSrC/

Investor Sentiment

Coming into the week individual investor bullishness and bearishness were virtually at the same level.  More than likely when this number is updated at the end of this week, we could see bearishness reach a new high point for 2018. 

Professional investors like to use this as a contrarian indicator, but bearishness shifted ahead of the start of the current pullback.  In fact, for nine of the past ten weeks individual investor bearishness has been above average, suggesting the so-called average investor sensed the downturn even before the pros.

I would like to see bullishness rebound as a sign individual investor see opportunity during swoons, rather than waiting for the bounce, to get excited.

Durable Goods report has come in below consensus with business investment unchanged.  This was the preliminary report and there will be big revisions, but there continues to be concern over a lack of business investment after a big surge in the first half of the year.

Stocks will open higher, but the challenge is holding the rally and finding buyers into the close as many close their books for the week and extended holiday weekend.


Comments
The US is now producing 11.7 million barrels per day. I'm expecting production to hit 12 million barrels per day by Q2 2019. There is bit of an oversupply as a result.

Brian Bigelow on 11/21/2018 10:10:23 AM
The market is like medicine, the more you think you know, the more you realize you know less. A vicious cycle is upon us for no reason and here we are caught with our pants down lol. Hope my retirement account will climb back up. Happy Thanksgiving Mr. Payne, I bid you and family a wonderful and thankful feast. An investor that loves Apple...

iris goldman on 11/21/2018 7:38:16 PM
 

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