November 14, 2018

Update-  SWN– Natural gas has risen significantly over the prior month on increasing signs of a cold winter. If you bought shares of SWN based on our article we recommend taking advantage of this opportunity and selling a fraction of your position. Today’s 10% gain in natural gas is likely based on short covering and not fundamental expectations, therefore natural gas and SWN will likely become extremely volatilite in the coming days.

On the economic calendar Fed Chairman Jerome Powell speaks at 5pm ET and CPI is released at 8:30et.  Consensus is for a year over year rate of 2.5 percent. Given the recent drop in the price of oil that will not be entirely picked up by this release, this number may be considered less important than it otherwise would have been.

Overnight, Germany and Japan both released negative quarterly GDP data, confirming that global growth is slowing. Please see the Chart of The Day.

Yesterday crude oil had it biggest daily loss (7.1%) in over three years. Since early October Crude oil has dropped over 35 percent, from 77/barrel to 55/barrel. Having broken through all pertinent moving averages and the two year trend line (orange), the range highlighted by the yellow bar (55-42.5) should provide support. Further the RSI now stands at its lowest level in decades, another sign we should see support soon, even if it is only temporary. From Bespoke Investments: This is the fastest that crude oil has gone from a 52-week high to a 52-week low (30 trading days) since at least 1984.

From a macroeconomic perspective oil is sending us a strong message about economic weakness in the global economy. Might the decline in oil also be signalling emerging weakness in the US economy?