Yahoo Finance OPEC countries will cheat and the deal won't last: trader
By Alan Valdes, director of floor operations at Silverbear
The markets ended the day mixed yesterday. The Dow (^DJI) was up a mere 1.98 to close at 19,123.58 and the S&P 500 (^GSPC) lost 5.85 to end the day at 2198.81. The big loser of the day was the Nasdaq Composite (^IXIC), which was down -56.23 to finish at 5,323.68.
It seems, after having a blowout weekend, processing 629 packages a second, investors were still worried about the weak Q3 earnings report from Amazon, helping to drag down the Nasdaq. The domestic-heavy Russell 2000 (^RUT) closed down -5.88 to 1,322.34 after ending a 15-day winning streak on Monday.
Some investors are locking in some small-cap profits. And why not? The Russell closed out the month up 11%—the best month since 2011—and outperformed the S&P by 3 to 1. The big losers last month were global bonds, posting $1.7 trillion in losses—their worst month in history.
OPEC is toast long-term
The big surprise came from Vienna yesterday, as OPEC reached a deal on production. Saudi Arabia got the 12-nation block to agree to a 1.2 million barrel a day cut in production, sending WTI soaring to close at $48.98.
Will the deal hold? Probably not. It’s a changing world for oil, and one must wonder how relevant OPEC is. And that’s assuming those who inked the deal keep their word—and historically they have not.
In the long term, with a more energy efficient world, new technologies are discovering vast amounts of untapped reserves here in the United States. Two weeks ago, there was a $900 billion find in Texas. Also, solar is becoming more dependable and cost-efficient. Accordingly, the days of OPEC [sic Saudi Arabia] dictating the price of oil to a world awash in oil, may be over.
Harris Shapiro from focusedstocktrader.com and other savvy investors have begun to take a little of the table. Harris had been all-in after the election, and he is now about 70% in equities. I am also watching institutional selling pick up at these levels. Some of it could have been end-of-month reshuffling of funds and large investors. We all agreed this rally most likely will continue into the new year. However, with a Dow that gained 1000 points in a month (only the fourth time in history), why not lock in some profits?!
What jobs numbers mean for Trump and the Fed
Today we got initial jobless claims, which jumped +17,000 to 268,000, the most in five months. Yesterday we got a read from ADP showing the private sector added 216,000 jobs. Amazingly, 100% of those hires were in the service sector. Two problems with that: First, they are usually low-paying jobs, and second, for President-elect Trump, service sector jobs are usually in urban areas.
Out there in the hinterland, west of the Hudson and east of California, it is still uncertain how the new administration will jump start job growth. One thing for certain—don’t expect to see factories humming anytime soon. Like oil, it’s an ever-changing environment.
For traders, this month’s job number Friday will be anti-climatic. Whether it’s 150,000 or 250,000, it won’t make a difference. The Fed has telegraphed its intentions to raise rates. The odds-makers are calculating a 98% chance of an increase. The only question on traders’ minds: Will It be a 0.25% hike, as predicted, or a surprise 0.50% hike, as is being whispered around?
