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T3’s Market Wrap: Flying High Again

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Crude oil rallied above $49 today after the International Energy Agency increased its estimate for 2017 oil demand growth.

The EIA said that oversupply conditions in global oil markets are abating, with OPEC inventories falling for the first time in 5 months.

They added that the negative impact of Hurricane Harvey, is “like to be relatively short-lived.”

Meanwhile, in the United States today, crude oil inventories rose by 5.888 million, However, distillate and gasoline inventories declined by much better-than-expected margins.

That put oil service and energy stocks at the top of my ETF leaderboard.

Retail stocks were also strong today on chatter that Nordstrom (JWN) was set to be taken over by private equity firm Leonard Green & Partners. Department store names like Macy’s (MC) and JC Penney (JCP) led the charge higher.

The SPX made a record high for the second straight day, inching ever close to the 2500 mark, closing at a record high of 2498.37.

The Nasdaq and Dow Jones Industrial Average also closed at record highs.

All 3 indices rose modestly, and the the Russell 2000 once again showed a little relative strength with a 0.2% gain.

The Russell got a boost from the strong US dollar, which rose on today’s August PPI report.

The PPI numbers were actually weaker-than-expected, but deemed still strong enough to push up the US dollar and Treasury yields.

The strong dollar hurt gold, and the Vaneck Vectors Gold Miners ETF (GDX) fell -1.7%.

The VIX fell -0.7% today on the ongoing contraction in volatility. The action feels a bit like the June to July snoozefest.

This morning, Scott Redler said “digesting above 2488-2490 would make it easy for active bulls to stay long since another flag-type pattern can develop.”

With the SPX sticking abov that 2488-2490 range and flat-out refusing to break down, it’s safe to say the bulls are still in control of the narrative.

However, we’re at some risk of overheating. The CBOE equity put-call ratio has been near historically low levels for the past couple of weeks, indicating that traders have been aggressively scooping up call options.

Also, the VIX has been dipping, and if it goes under 10 again, that would support the case that sentiment is getting out of control.

That said, there are some signs that individual investors are not very excited about this market.

The AAII sentiment survey has been depressed all year despite the market’s relentless grind higher.

You’d think people would love a market that just keeps going up with no volatility, but the opposite is true.

Apple (AAPL) fell -0.8% despite an overall positive reception to yesterday’s iPhone unveiling event.

To be fair, as you can see in this chart, Apple’s come an awfully long way this year and deserves a break:

Bitcoin is also in the news, with many traders fearing a crash after JP Morgan (JPM) CEO Jamie Dimon called the cryptocurrency a “fraud” yesterday.

Economic Mohamed El-Erian said today that “current prices assume massive adoption, which is not going to happen.”

Meanwhile, rumors have been swirling that North Korean hackers are targeting Bitcoin exchanges.

According to Coindesk, Bitcoin has fallen about 20% since its September 1 record high:

Where it’s going… no one knows.

 

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