Market Briefing For Wednesday, November 16

Tuesday's S&P turnaround was not only our bias, but has everyone scrambling to explain the behavior; especially the bond move as well as stronger Dollar in the presence of firm Oil. This market, like the political backdrop, is not as 'black or white' as some argue, but as is the case in most aspects of life (including markets), shades of gray.

The complexity is real for sure, but the shuffle is about like I suggested; the laggards (down on the idea of a 'trade war panic' which I thought to be nonsense or the whining by some Europeans .. who didn't read the book I guess, unlike those who did; namely the French and Brits) were expected to rebound today while the initial infrastructure and heavy construction type of initial leaders (on the idea of an isolated US that would somehow rebuild while international companies sink) tended to retreat, as also suggested.

Yesterday I pointed-out a phone call that went 'well' between President Xi of China and President-Elect Trump. Today the same newspaper that is an organ of Beijing that condemned the U.S. Monday, and returned to the use of 'comrade' as official greetings, well guess what. They wrote a fabulously flattering endorsement of the 'progress' coming in the US as the Trump leadership promises a 'new era of cooperation' with China. It was very much again what I've suggested: 'negotiation' not devastation.

Then there was Saudi Arabia. They haven't caught on yet, but they did open themselves up to a trap by saying they must cut oil production (of course that doesn't mean they or others won't cheat; just that they want that to still be the hallmark of the upcoming OPEC meeting) that rallied the stock market and accounted for most of today's rise in the S&P.

Message to Riyadh: your trap is the same word but spelled with a 'c'. To those who don't know; this morning the Saudi's threatened to 'destroy the U.S. economy' IF the United States 'dares' to stop buying their oil. I thought they were smarter than that. At least the Chinese likely called on their institutes that study the USA, to figure out we are too involved to totally go it alone. The Saudis also probably didn't read the book.

I didn't read it either, but I know what the thrust is. First of all, Trump will most likely work it out with them. If not; he'll call their bluff. By virtue of a stupid press release like they put out there, they just admitted that their flooding of oil in the past year intended to destroy not only US 'shale' or new secondary and tertiary production, but harm Russia and Iran too.

In essence unlike China, which feels they already have so much capacity for modern production that we lost years ago, Saudi Arabia knows that the U.S. can, if it wants, not only be energy independent but actually an 'exporter' of Oil. That means don't mess with us.

Lest I digress, their threat isn't the point now for the market. The oil rally is. As is our overall viewpoint since the Election of why there will be hits to the market, maybe nasty ahead, but risks of implosion are reduced in a sense by capable policy makers coming to the helm and by Congress which should respond favorably to most initiatives to grow the USA in as strong a way as possible within the bounds of working with others too.

Bottom-line:

The market broadened-out with alternating moves. There is still the prospect of a forthcoming market exhaustion, but it depends mostly on .. OIL. The scramble excessively relates this to our Election, as Financials and so on settle down. However the Election has changed the dynamic more favorably for the long-term.