Market Briefing For Tuesday, October 11, 2016

Propelled higher by Oil and Dollar strength Monday's stock market thrust higher, though it wasn't reflecting the dogfight that followed testy positions taken by not just the candidates, but within the 'Parties'. Later in the session the edge came-off the rally and it faded as we desired.
 

In our second video tonight, I discuss what I suspect is 'really' going on with respect to a 'reported' alignment of Russia's Oil policy with that of the Saudi's. This matters, because the latest 'oil war' was begun by the Saudi's (as thoroughly described here at the time) to somewhat thwart Russia's financial capacity to aid the Iranian / Hezbollah / Syrian axis; a posture that the younger leadership in Riyadh has backed-away from a bit, perhaps because they recognize a Wahhabi fanatic fundamentalist mixture of pseudo-Islamic-extremists ultimately target Saudi Arabia too.
 

(Dow Jones Industrial Average overlay doesn't have to replicate; but..)
As the Islamic extremist terrorists start biting the hand that feeds them; I contemplate a 'quid pro quo': back-off the lengthy anti-Russia / anti-Iran / anti-U.S. flooding of cheap Oil, in-exchange for Russia easing-off the support for airstrikes against Aleppo. Again, the Saudi's likely feel that the radicals have turned their back on the funding source (after all the Saudi's funded directly or indirectly the attacks on America and earlier incarnations of al Qaeda, then lamenting how ISIS usurped some roles the terrorists wrapped-themselves in as they became more central to a fundamentalist campaign (that would ultimate wish to absorb the Saudi monarchy too). In other words the big convoluted Middle East mess of course continues while allegiances are shifting. 

Here's where it gets interesting: if my hunch is remotely right (like the region everything is subject to change) there would be a 'quid-pro-quo' that goes unspoken between Riyadh and Moscow. Oil prices would be more stable; the United States could resume talks on resumption of the coordination with Russia in the Middle East fighting, as a Kerry / Lasrov 'rapprochement' suddenly appears and reconciliation not tension looms large. It might not be reported that way, but as I am fond of often saying just: 'follow the money'. The money says there's a quid-pro-quo here. 
 

 

Speaking of theatrics, that also matters, and more may appear before the Election. The way the news flow has been, a lot can happen in the remaining three weeks. What's useful is we think the Democrats 'get it' (whether they'll say so or not) about citizenry figuring it out regarding a favored trading approach that benefited everyone but U.S. workers. It's now probably understood by both parties that without a vibrant working class, not just an upwardly-mobile middle class, you have serious issues. 

So it's not all about demographics, the Fed or valuation (though all play intense and challenging roles); it comes down to growth. Sanders and Trump have provided valuable discourse (although not deeper specific cause and effect prospects) that gives American voters more insight than they've had before, including an understanding how jobs contribute lots more than mere compassion when it comes to revitalizing our cities as well as repressed rural and other areas. Hence I'd be slightly optimistic that trade deals and even immigration policies, will be tempered by an inability of some politicians to gloss-over the downside of their policies. 

Daily action 

We discussed the 'two sides of the coin' with regard to Oil at this point and the idea that the market has vulnerability regardless of a victory by either side in the Presidential contest (if it deserves the term) that is not exactly the model to inspire either idealism or conservatism in our youth. However, ironically, the arguments are heated enough to suggest an 'actual contest' versus both sides being of similar political or 'insider' backgrounds, as is usually the case. It's not Presidential; but at the same time it's anything but boring. Good for the country? That's to be determined. As the world has been in decline, with demographics nobody wants to challenge (here, Japan or Europe); who knows, this might provoke real dialogue in the wake of the campaign here as well as abroad. It's clear much needs addressing and reform barely started.

The 'trading range' 

The trading range bought-time with Friday's recovery; so it could stay relevant ahead of the debate. However this market relates more to the perception that the 'powers that be' can sustain strength regardless into the Election; and deflect every shakeout effort that comes along. 

We'd say don't count on that persisting. And don't count on anything but the Fed perhaps avoiding rocking the boat via rate moves in November being the only influence on the market's stability.