Morning Reads

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Open Interest Changes

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Prepper

Energy prices keep on slipping, with benchmark West Texas Intermediate (CL1:COM) so far down 22% in the fourth quarter and the average price of stateside gasoline falling 16% to $3.21 a gallon. It comes as the U.S. continues to pump crude at a record rate, cranking out a record 13.2M barrels a day, which is more than oil-exporting heavyweights Russia and Saudi Arabia. The developments have been a boon to the American consumer, as well as the Federal Reserve, which continues to receive much applause from the market for keeping inflation at bay.

Bigger picture: OPEC members have been forced to respond to record U.S. production, with tensions most apparent in the reactions from kingpin Saudi Arabia. So far the Kingdom's strategy has been to slash more output, but the deeper cuts have not resonated with oil bulls and have even formed some cracks within the OPEC+ group. Economic weakness in China, Russia's shadow fleet and the removal of fear premiums from the Israel-Hamas war have also helped contribute to oil's decline, and the Saudis are hesitant to go nuclear by opening the taps, which would dent U.S. shale but cause it to lose many OPEC friends in the interim.

Many have also been eyeing recent developments to see whether the U.S. will refill the Strategic Petroleum Reserve, which has fallen to its lowest level since the 1980s following the release of 180M barrels last year. At the time, the Biden administration said it would consider refills "at or below about $67 to $72 per barrel," but there have been opportunities that have been passed up when oil retook that range. WTI crude is now trading at around $71, and while the administration has been adding to the SPR, the buybacks have been limited to about 3M barrels per month given physical constraints in "the way the caverns are set up."

The technicals: "The price of crude oil is likely to continue falling from current levels before settling at $70 at the major support," writes SA analyst Damir Tokic. "Even though I agree with the bearish outlook, I would not recommend shorting crude oil - the geopolitical situation could change in a moment. In this situation, a long-put option strategy seems appropriate."

Self-driving faith

The safety issues and regulatory scrutiny facing General Motors' (GM) Cruise have pushed Alphabet's (GOOGGOOGL) self-driving vehicle unit Waymo to the top of the leaderboard. The two companies had been competing neck-and-neck in recent years, but the last few months have seen Cruise's fortunes shift, as safety concerns forced it to halt operations. "We went from an all-time high to an all-time low," Mo Elshenawy, Cruise's new president and CTO, told staff. The company's focus now is to rebuild trust with regulators, which will likely take time. On the other hand, Waymo hasn't seen a change in tone from regulators, and its ridership has increased more than 10 times this year. (1 comment)

On the Hill

The heads of Wall Street's eight biggest banks - including JPMorgan (JPM), Bank of America (BAC) and Citigroup (C) - will testify before the Senate Banking Committee today to warn lawmakers that the "Basel III endgame" proposal will hurt the economy. Regulators proposed raising capital requirements for large U.S. banks in the summer, which the industry has repeatedly opposed. "The proposed Basel III Endgame rule would unjustifiably increase capital requirements by 20%-25% for the largest banks," JPMorgan's Jamie Dimon wrote in his prepared testimony. Morgan Stanley's (MS) James Gorman will also warn lawmakers that the plan would drive more activity to the less regulated parts of the financial services industry. (15 comments)

'Eating their words'

Economists who forecast the need for high unemployment to rein in inflation are now "eating their words," according to U.S. Treasury Secretary Janet Yellen. "We're not seeing the usual signs of a weakening labor market that would make you fear a recession." Her statement comes as the labor market steadily cooled in October while the unemployment rate ticked up to 3.9%, and the JOLTS report showed a larger-than-expected drop in job openings. Recall that Fed Chair Jerome Powell said the U.S. was on track to get inflation down to 2% without incurring large job losses. While markets await the ADP jobs data due today and Friday's nonfarm payrolls report, SA analyst Calafia Beach Pundit explains six charts that look at the economy from a big-picture perspective. (2 comments)

Today's Markets

In Asia, Japan +2%. Hong Kong +0.8%. China -0.1%. India +0.5%.
In Europe, at midday, London +0.5%. Paris +0.5%. Frankfurt +0.3%.
Futures at 7:00, Dow +0.1%. S&P +0.2%. Nasdaq +0.3%. Crude -0.9% to $71.70. Gold +0.2% to $2,039.30. Bitcoin +5.1% to $43,861.
Ten-year Treasury Yield +2 bps to 4.20%.

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 International Trade in Goods and Services
8:30 Productivity and Costs
10:30 EIA Petroleum Inventories

Companies reporting earnings today »

What else is happening...

Apple (AAPL) climbs back above $3T amid smartphone optimism.

Activist investor Ancora pushing Disney to add Peltz to board.

Hydrogen industry alarmed over leaked draft of tax credit rules.

Job openings unexpectedly fall in October - JOLTS report.

Elon Musk's xAI startup files to raise $1B in equity offering.

Bitcoin (BTC-USD) extends gains to surpass $43,000.

Closing arguments end in DOJ trial against Spirit-JetBlue deal.

CVS hurts GoodRx (GDRX) with new drug pricing model.

P&G (PG) sees up to $2.5B in charges from Gillette, restructuring.

Pioneer (PXD), Exxon get FTC request for more info on merger.

Goldman lists top 30 mutual fund underweight holdings.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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