Morning Report: Oil Flirting With $100

(Stocks in this article: NYSE: DE, Nasdaq: ERIC, NYSE: ANF, NYSE: TM, NYSE: LTD, Nasdaq: SGEN, NYSE: FRE, NYSE: SPY, Nasdaq: QQQQ, NYSE: DIA, NYSE: FNM, NYSE: GM)

On a day most consider a strange mix between holiday and workday, traders in the oil pits will make no mistake of it. While most of you clean your desks and pack your bags, hard working oil barterers are attentively anticipating today's weekly inventory report as crude has $100 in its sights.

1. Oil Inventory Catalyst to $100 - For reasons to be discussed in topic 2, oil found hope in yesterday's Fed releases. Traders anticipating future economic juicing rate cuts drove oil up rapidly. Follow-through alone could take oil over $100 today ahead of the inventory report, which will decide where the commodity closes. Analysts surveyed by Dow Jones Newswire anticipate an 800K barrel build to inventory will be reported for last week. Analysts surveyed by Platts expect a 150K barrel draw in crude, so there's enough confusion to allow for oil to push ahead of $100 before the data release even. Clearly, depending on the data, I believe there is a good chance fanatic and frenzied trading could take oil to plus $100. If the data is bearish, I would hold on because it seems clear this pit wants to go to $100 one way or another. If the news is bullish, I would sell before the close of trading after oil breaks the illusory peak. This price level is unsustainable in my view in light of factors I've outlined in countless past articles. The caveat, war I see with Iran sometime next spring should help oil to break all records. My play is still the refiners now, including Valero (NYSE: VLO) on its specific issues holding down the stock.


2. Tuesday's FOMC Meeting Minutes & New Projections - Bernanke's Fed produced forecasts that indicate slowing economic growth and softening inflationary pressure, nothing much different than what they've already been telling us. However, despite discussion in the October meeting minutes indicating that a cut was not a sure thing (again old news) the market found hope in the release. It mistakenly viewed Fed concern for the slowing economy as bias for future rate cut. I am disappointed in the ignorance and blind hope of market participants in this regard. Clear logic and the words of the Fed are telling us that a December cut is not in the offing, yet the market continues to hold out hope, even expectation for it. I expect economic and geopolitical conditions will lead to rate cuts in '08, but nothing tells me to expect a December action. It just may be that the media misinterpreted the driver for the market yesterday. It may very well have been Freddie Mac's (NYSE: FRE) news that raised expectations for a near-term rate cut. That would certainly be more likely and justified in my view.


3. Economic Reports Non-Events - A few economic reports reached the wire today, but I see no impact to equities as a result. The Mortgage Bankers Association weekly data showed applications fell last week. Until mortgages reach inflection point and the market truly turns, this report is somewhat meaningless in my eyes. Weekly Initial Jobless Claims came in at 330,000, teasing the high end of this year's run rate, but off 11,000 from last week's report. This is clearly not alarming data as all eyes search for rising unemployment. The second reporting of November University of Michigan Consumer Sentiment came in above expectations at 76.1, but still weaker than the measure taken during our last recession. Leading Indicators reported a 0.5% decline, worse than the consensus view for a 0.3% decrease.


4. Company Specifics - In news I plan to follow up on with a specific article, Toyota Motors (NYSE: TM) looks to challenge GM (NYSE: GM) in China. Surprisingly, this might be one battle American manufacturers can win over the Japanese, due to history... I think you see where I'm going with this. Deere (NYSE: DE) put up good numbers, as all agriculture plays continue to do well. Look for an article later today or on Thanksgiving covering this subject.

Market-Moving News

• AP/Yahoo!: Asia, Europe Move Lower, US Futures Don't Look Better


• Federal Reserve: FOMC October Meeting Minutes


• Bloomberg: Market Views Fed's Forecasts Positively


• CNN Money: Oil Marching Toward $100


• Bloomberg: Weekly Jobless Claims Down 11K to 330,000


• Platts: Oil Ahead of the Inventory Report


• Financial Times: Government Bonds Rally on Equity Weakness


• ECONOMIC REPORT: October Leading Indicators Reported -0.5% Vs. Consensus -0.3%


• ECONOMIC REPORT: U. Michigan Consumer Sentiment 76.1 Vs. Consensus 75.0


• CNBC: Mortgage Applications Fell Last Week


• CNBC: OECD Says Mortgage Losses Could Reach $300 Billion


• CNBC: Paulson Finally Quits Cheerleading, Sees Home Loan Defaults Heavy in '08


• DailyFX: Will Equities Follow Carry Trades Down?


• MarketWatch: Treasuries Fall Below 4%


• CNBC: Nonresidential Construction Picks Up In October


• Yahoo! Earnings Calendar


• AP/Yahoo!: Deere (NYSE: DE) Profit Climbs


• Forbes: Ericsson (Nasdaq: ERIC) Shares Fall on Outlook


• TheStreet: Abercrombie (NYSE: ANF) Sees Flat Trend


• AP/Yahoo!: Toyota (NYSE: TM) Raises China Sales Goal


• TheStreet: Limited (NYSE: LTD) Cuts Forecast


• SeekingAlpha: Seattle Genetics (Nasdaq: SGEN) Bright Future


• USA Today: 39 Million Traveling on Thanksgiving


• BBC: Mid-East Meeting Planned for Next Week


• Economist: The Geopolitical Week Ahead


• Iran Daily: Tales from the Dark Side

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