The Morning Hammer: The Comeback


Crude oil is up fractionally this morning despite a smaller-than-expected drop in crude oil inventories, as reported by the API yesterday after the close. EIA inventory numbers are due at 10:30 a.m. ET.

Bloomberg is also reporting that China is boosting crude oil imports due to declining domestic output.

It looks like oil traders are cautious heading into the OPEC meeting. It's clear that chatter about production freezes/cuts has helped oil climb off the lows, but we are seeing lots of conflicting headlines about OPEC's strategies and there's no telling what's going to actually happen.

SPX futures are in positively territory after the second big decline in the past three days.

The bears definitely drew some blood, and It definitely feels like volatility is back after 51 trading days without a -1% down day.

Sentiment is mixed but leaning negative.

The CBOE equity put-call ratio was 0.75 yesterday, which isn't overly bearish.

The ISE Sentiment Index was 60 though (60 calls for every 100 puts), which is a sign of tension. The 10 day moving average has moved down to 82.6 which is a sign of growing bearishness.

Apple (AAPL) is up this morning on chatter that iPhone 7 chip orders are higher than expected. This is no surprise given that T-Mobile (TMUS) and Sprint (S) both reported strong iPhone 7 pre-orders yesterday.

The WSJ issued a negative article on Tesla (TSLA), saying the Model 3 will be hurt by competition from the Chevy Bolt. And yesterday, noted hedge fund manager and short seller called Tesla/Solar City (SCTY) a “walking insolvency.”

But yesteday, Schaeffer's Research reported that Tesla's 10-day put/call ratio is at an annual, implying that a lot of traders are betting hard against Tesla.

That kind of negativity can actually form a cushion because it implies that negativity is priced in.

As was rumored yesterday, Bayer agreed to buy Monsanto (MON) for $128/share in cash, up slightly from the last offer of $127.50.

Overnight, UK unemployment remained at an 11-year low in July.

France's CPI was in-line with expectations.

Thailand left rates unchanged, as expecteed.

China's aggregate financing was 1.47 trillion yuan in August, blowing away the 949 billion consensus.

I'd continue to keep it simple. Watch oil, biotech (IBB), and the Russell 2000 for clues. That's the stuff the bears can use to generate a real scare, so see if they build higher.

Good luck out there.