Monday Morning And All Is Cautious

Posted on by zman

 

 

Market Sentiment Watch: Futures were weak overnight but have slowly improved over the course of the pre market hours this morning. This week is much lighter on the eco data front than last which actually may give the market a bit of a chance to drift slightly higher.  In energy land, we have a heat wave affecting a majority of the country with some record temps out west which should continue to be supportive of nature gas prices which have already had a pretty strong run this month.  A number of our most played in names speak at the RBC Global Energy and Power Conference today and tomorrow including BEXP, CLR, CHK, HAL, and  PXD.

BP Spill Watch:

  • June 5 - collected 10,500 bopd and flared 22 MMcfgpd via the cap. Still closing valves so these numbers should rise.
  • BP has capacity to handle 15,000 bopd and a technician has been quoted as saying they are at max capacity now.
  • BP expects to have a second collection running by this coming weekend.
  • BP has engaged Goldman to "fend off hostile takeovers".

The Week Ahead:

  • Monday 4/12: Consumer credit (F= -$1B)
  • Tuesday 4/13: None
  • Wednesday 4/14:  EIA Oil Inventory Report, wholesale inventories, Beige Book
  • Thursday 4/15: EIA Natural Storage Report, Jobless claims (F=445K), trade balance (F=-$41B), Federal budget.
  • Friday 4/16:  Retail sales (F=0.2%; (ex auto, F=-0.3%)), consumer sentiment (F=74), Inventories.

In Today's Post:

  • Holdings Watch
  • Commodity  Watch
  • Stuff We Care About Today - WLL, OIH comments, EOG, RBC schedule
  • Odds & Ends

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $7,500
  • 99% Cash
  • Positions are updated on the ZCAT, ZIM, ZLT.
  • Friday’s Trades:

    • Waiting for some Catalysts to get here which are closer to month end.

ZIM (Zman Inefficient Markets portfolio)

  • $9,200
  • 9% Cash (5 positions)
  • Friday’s Trades:
    • Sold 1/4 (25) June $21 calls for $0.72, up 146%. Position is just too large for the portfolio at present.
    • Added (50) more BEXP June $20 calls for $0.20 with the stock at $17.10, off nearly 8% on the day. The company speaks at a conference next week and could announce additional well results. Moreover, my sense is that onshore plays will assert themselves again in a more normal market environment as preferential to offshore plays in coming weeks.

Commodity  Watch:

Crude oil fell 3% last week to close at $71.51 with all of the drop coming on the heals of the disappointing jobs number on Friday. The 12 month crude strip is now trading at $75.73. This morning crude is trading essentially flat after an overnight swoon with equity futures.


-

Natural gas rose 11% last week to close at $4.80. The 12 month strip is now trading at $5.23. This morning gas is trading off nearly a dime.

  • Rig Count Watch: Gas rigs fell 20 last week. The following chart would seem to indicate the recent recovery rally in gas directed drilling is potentially starting to stall. However, I think before gas bulls should really get excited we will be talking about taking out the lows from mid 2009 and I don't expect that to occur until mid 2011 due to lease hold obligations and enabled by strong hedge positions. Note that while rigs may be stalling, the counts are well above year ago levels and gas production, according to the EIA remains at cycle highs ... so little reason for cheer just yet so I'd call a pullback here more supportive than additive to any bullish arguments.


  • Weather Watch: Hot!
    • Cooling degree days:
      • 47 CDDs the week before last which helped us to a smaller than average 88 Bcf injection last week.
      • 58 last week, spot on with the forecast of 58
      • 55 CDD forecast for this week

 

  • Tropics Watch: Nothing to report yet but that's normal, even for as busy a season as this one is expected to be.
     

 

Stuff We Care About Today

WLL Reports Six Big Bakken Sanish Wells

  • All six in Sanish, average IP of 2,682 BOEpd - which is fairly strong vs their average performance but not record.
  • They did report one well on for nearly 2 years now has produced 575,000 bo, the Behr 11-34H which IP'd at 3,245 Boepd in June 2008. There is no stronger argument for higher IP wells garnering higher EURs (ultimate recoveries) than time and cumulative production.
  • I expect news on their next test at the Lewis and Clarke area to the southwest in the next 30 days.
  • Nutshell: Good report, especially that cumulative number. I continue to hold the common in the ZLT.

RBC Conference Today (all times EST)

  • HAL, RIG - 8:30 am (panel discusssion)
  • KWK, ECA - 10:30 (panel on Canadian shale gas and unconventional gas)
  • GDP - 1 pm
  • WRES - 2 pm
  • BEXP - 3 pm
  • CHK - 6 pm

Presenting tomorrow: VLO, PXD, CXO, APC, NOG

OIH Watch:

Key Takeaways:

  1. The OIH has been pounded:
    1. Down 21% from the start of the year
    2. Down 31% since the Deepwater Horizon sank 7 weeks ago. 
  2. Forward Valuation is cheap (see table below)
  3. Brokers are sticking with the big names for now. The moratorium on deepwater drilling, and a probable slow down in shelf drilling as well will/has result(ed) in only very modest negative earnings revisions for the remainder of 2010.
    1. HAL - very limited exposure to deepwater, numbers only slightly down, more than accounted for in stock.
    2. SLB -the Street has taken a couple of pennies out of 2010/11, again more than accounted for in the stock.
    3. BHI - I haven't seen any modification to number here since the accident other a less than 1% cut to 2011 numbers. 
  4. Indemnification:
    1. I think HAL is indemnified to the spill. This conclusion is taken from more than one conference call with HAL management and from much Street commentary. They are being tried in the court of public opinion at the moment, leaving the stock at a much steeper than normal discount.
    2. RIG - unsure but likely to take a bigger hit to near term earnings due to the moratorium than HAL or the other big cap service providers. I have repeatedly decided to steer clear of this one for now as they are the key finger pointee with BP.
       


 

Other Stuff

EOG Marcellus Blowout - EOG announced a blowout in the Pennsylvania Marcellus on Friday. The market and group were already weak but EOG fell especially hard, down 6+% on the day. This is almost assuredly overdone.

OII Cuts Outlook - due to deep water moratorium

  • 2010 goes:
    • from $3.25 to $3.55
    • to $2.80 to $3.10
  • This is not unexpected as many of those 33 rigs shut down by Congress had one or two ROV's contracted from OII aboard. I'll be watching to see how hard it gets hit.

 

 

 

Odds & Ends

Analyst Watch:

  • ATPG  - Wunderlich cuts target from $20 to $10, rating Hold

Interesting Reading Watch:

 

120 thoughts on “Monday Morning And All Is Cautious”

  1. whoa!! That 2nd article you linked… pretty powerful. Glad to see some key people who are willing to stand up for what is right and fair. Punishing an entire industry for a specific set of circumstances is purely political, plain and simple. Amazed to see people willing to say this, however. Brave group of men. Brave statement. Thank you for posting. Bravo!

  2. BOP – yeah. Normally I’d write off $330 mm per month in lost job revenue in Louisiana due to a federal directive as an “unintended consequence”. But given this Administration, call me cynical, but it I’m not so sure it’s not more of a function to push them to all go install insulation or solar panels. Sheesh.

  3. SWN CEO at RBC saying he is “pessimistic on short-term gas prices” but that SWN’s b/e for nat gas is below $4. And he is very encouraged for nat gas long-term (good thing, as that is what he gets up every morning and goes to work to produce).

  4. This HAL presentation by the way is focused on fraccing and completion ops in the Haynesville and Fayetteville shales, sounds like SWN is talking on this panel as well. Talking about activity driving reinvestment in service as that’s been absent due to low prices. Not stock moving stuff.

    They are saying the recent run up in rig count has been largely in the rich gas plays, not dry gas and in oil … makes sense.

  5. #2 — worse than that. They plan on riding the spill to jam across the Waxman-Markey Energy Bill (aka Cap and Trade). This is a very bad and corrupt bill. But “let no crisis go to waste” continues to rule the day.

  6. re 5 – They’ll need something to replace the deepwater carrot with. That’s almost gotta be onshore gas drilling / a push to transportation for nat gas.

  7. TPH on BP spill progress —

    LMRP update – Good news: Strike that…great news. Lower Marine Riser Package (LMRP) cap process has been a success. The process is capturing ~10kbbls/day. Assuming Flow Rate Technical Team numbers are correct at 12-19kbbls/day, this says 50-80% of the leak has been stopped. BP continues to tweak the topside processing, pressures, etc., so the volumes may move higher – in fact BP has indicated they hope to increase the captured volumes. At this point, only one of the four vents on the LMRP cap is closed. The live video (cnn oil spill webcam ) certainly shows lots of oil is still coming out…which implies the leak is closer to the mid-high end of the spill range, not the low end (at least to our untrained eyes). Next update from BP is 10am ET today – but seems like popular/financial press is hearing it faster than the BP website – so keep your eyes on the tape.

  8. Credit markets are still keeping to the greener side of the fence… but just barely. Still, bettern last night’s futures would have indicated. Will be looking for any new issuance in the high yield mrkt to creep back. On Friday, Spectrum Brands was the first HY bond issuer to get anything done since May 27th. $750mm of B2/B rated bonds… so good test of a functioning market.

    IG -3/4 bps tighter (better) today

    HY +1/4 pt higher (better) today

    TED seeing his first hint of a decline in almost a month of grinding higher on the Global FEAR trade. TED (as I look at the spread) is clocking in at +40.7bps so far this morning, down a smidge from Friday’s +41.1 close. Watch this index… as everyone else is.

  10. Goldman cuts BP from Buy to Neutral. Hmmm. Now, I were putting up a defense to keep them from getting bought out, I might talk to my analyst about things to raise the price not lower it. BP folks are going to be ticked but at least we know GS has a Chinese Wall, lol.

  12. Z- what is the nature of HAL’s indemnity? Why do they think they are not liable?

  13. Dman – I’m not a lawyer but they said repeatedly they believe they are fully indemnified as per their contract with BP.

  14. #13 OK, that’s kind of what I was looking for. i.e. there is an arrow pointing people to where the money actually will come from.

  16. Morning all. Support at 1056,1044. I am looking for a turn, could start today….according to the voodoo tomorrow should be a big up day.

  20. Credit still tinged green on the day. But, bouncing on either side of unch’d.

  21. Thanks BOP, so at least no big divergence to worry over today just yet.

    BP – update, continue to ramp production from the cap, bringing in another vessel to ramp capacity.

  23. Listening to BP update morning conference, about to listen to KWK and ECA at RBC. Sitting on hands for now. Would expect news out of BEXP in the near term, maybe this week but likely next, then end of month.

  25. CFW.TO – for you Cardium fans, these guys sound interesting, just upped capex this morning to meet demand for fracs there, in the Bakken, etc, speaking at RBC on this call now.

  27. Was just half listening to someone on CNBC saying that BP are rigging (no pun intended!) the numbers as when they cut the pipe it increased the oil flow by maybe a further 20% and that is not being taken into account when they give the percentage now being capped.
    Frankly imo anything they can cap at the moment has to be a plus.

  28. Nicky – I think its an educated guess on the % and little more. The barrels produced however would be a measured number so as long as that keeps rising it’s a good thing. The cap has 4 or 5 valves on top of it that let oil pass through. At present, only one is closed (diverting oil up the riser). As they optimize the flow and get capacity to handle higher volumes in place on the surface they plan to close more of the valves. They also plan to utilize the choke and kill valves on the sides of the BOP to produce to the surface, taking some of the volume off before they have a chance to leak around the cap. This should be in place by month end.

  29. S&P looks very dodgy. Volumes all over the map, some names like HK running hot but several names barely trading.

  32. KOG — micro cap, high-beta to both oil and the mrkt… no worries here, that I can think of. Hearing largest institutional owner has been buying back their trading shares recently.

  33. We just made a lower low than Friday on lighter volume – so far good news!

    Z – thank you for the explanation in #28. Maybe I have my head in the sand but I am trying to remain hopeful. Especially as I live on the Gulf Coast of Florida – gorgeous ocean and beaches. It doesn’t bear thinking about how this could turn out worse case scenario. Local businesses are already seeing cancellations and the phones have gone very quiet.

  34. RE 26 – Can’t hold down my buying Nicky!

    In all seriousness, this is probably the start of a run to 1300, now that we diced through 1224 and 1227.

  35. BEXP performing lousily along with KOG. Probably a function of oil price being down with the S&P. Bakkens a very mixed bag today, no conviction out there at the moment.

    HK surprisingly resilient. Yes gas is up but this is usually one that gets sold on a day like today first.

    Still listening to this WCSB shale gas presentation at RBC. One thing is clear, we’ve always know there were 1,000s of TCF of gas up there but much of it was not economic. These guys are making clear that a big chunk of that gas is economic at current prices, and has just been made so in the last 3 years due to new horizontal, multi frac tech.

  36. Z – Keep in mind the gas differentials will always be bad until some more oil sands projects are around as consumers.

  37. Comment from RBC group – LNG in 5 years will be “supply short”. Says North America will be in very good shape to be exporting gas form both U.S. and Canada. That there will be one world price for natural gas, and that gas will begin to displace oil, say in 2015, and that N. America will lead the pricing since it is the Saudi Arabia of natural gas. Not a new argument, haven’t heard Encana beat that drum that hard before though. Explains why they keep buying into all the big plays from the Montney down to the Haynesville to get ready.

  38. V – they were just talking about the differentials continuing to weaken due to the Marcellus coming on.

  40. V – and I do understand they are talking their book to a big extent.

    Man HK looks like it wants to run on the slightest uptick in the S&P.

    Does anyone have the full list of RBC presentations? These panel discussions are very good.

  41. I don’t personally buy the supply short in LNG in 5 years with all the new LNG projects coming online in Qatar, Russia and Australia.

  43. V – I was mostly just reporting the news there. I know China is big on demand at the moment but that assumes that it gets a lot bigger.

  44. I understand, I was just commenting on the news. Just talking it out to make sure I’m not out to lunch.

  45. V – China and India are sucking up a lot of LNG no one thought they could. But as to how high it grows from here … dunno. Very tough to get good data. I see the occasional big contract signed in China, Japan, and S. Korea but I haven’t tallied them and I know they fall short of the capacity that has been coming out.

  46. re 37 Zman would you agree with that comment that natural gas could displace oil in 2015.Appreciate your thoughts or could it be sooner or later?

  48. V – me too man. I’ve taken on the math a couple of times there and have found that it’s better to follow the trend of imports which is not up when gas is below $4 but starts to inch up when we get close to $5. I would expect imports to move higher this summer if this price persists. One good thing about all that Canadian gas is that it is very far north of Calgary and it will take a long time for TransCanada to get capacity there. One guy compared the drive to get to where it was really busy as the same drive north of Calgary as the distance to Las Vegas south of Calgary. That’s a lot of pipe that would need to get added to their system unless they already have a trunk line up there. I have not looked at one of the system maps in years so maybe I’m out of date. Still, hooking up that much shale gas will take a lot of time and $ just in terms of the gathering system.

  50. re 46. I think it will displace some oil by then in North America. Just not very much. You have NG powered fleets being put in place now but they are smallish in the scheme of things and have been slow to expand. I’d be making up a number if I threw out a % on it but it will be a small number.

    HK at HOD. Odd.

  51. Thanks West for the Caret data. Rumor is > 1,000 bopd. That is a very big deal for them as this would be the first Bakken production released (FH production-private has I think 2 wells over there) in southeast Montana. It is not far from BEXP’s first test which we think we’ll have news on in June. If successful, that opens up a significant area of new acreage for BEXP (Pale Rider) to go along with Rough Rider and Ross.

  52. Core position will not be gone until:
    -Shorts in the juniors/equities have been crushed
    -Gold is over 2000
    -COMEX paper market no longer has control over price
    -The equities are being priced on the cash flows at the current gold price instead of a massive discount

  53. Thanks V!

    SPX needs to take out 1073 area to get this going to the upside and signal the minor down cycle is complete.

  54. RE 52 VTZ can you please explain last point I agree with the first four points however not sure what you mean equities being priced on cash flows at current gold price instead of massive discount?Why should equites be priced at massive discount?

  55. #52 – and everyone is talking about gold the way they were talking about real estate.

    On China/India NG demand. I think in practical terms it is infinite. What I mean is that they are going to have to replace crude oil imports with something. Their current LNG imports, whilst impressive in the LNG market, are still a small dent in their overall energy demand. If anyone can produce regas plants in record time, I’m guessing it would be the Chinese. If they need them, they’ll build them. They still do manufacturing, after all.

  56. #55 I forgot to add: obviously their vehicle fleet is just beginning, so switching to LNG will be easy for them & they are already doing it.

    I think the real question is whether there will actually be enough NG around once everyone realizes they have to switch.

  57. Dman – of course, they too have massive NG resources in the ground as well. Big tight gas sand reserves thought to be in the Szechuan basin. EOG should let us know on 2Q call how their project will go there. We know they have a commercial well though and I recall the size as being in the hundreds to thousands of TCF.

  59. #58

    “but the bit where my brain seized up was when I tried to visualize a factory/campus with 200 000 workers in it.”

    Thanks for the laugh, Dman-classic comment

  60. RE 54 – The equities are being priced at a pretty big discount compared to historic cash flow multiples because of people using low price decks.

    RE 55 – Except you can build an infite amount of houses. Gold is a limited supply.

  63. Will listen to RBC’s panel on the re-emergent North Sea just as Cont Ed at 2 EST, then Bakken panel (BEXP, CLR, WLL) at 3 EST.

  64. IM from XACS#1

    Equities (SPX) continues to try to stay in the green while credit markets (CDX IG) indicates that the SPX should be trading down -13 to -15 pts on the day. Equities may be able to maintain their positive outlook on life, but recent history is not working in their favor. To say the least, equities have struggled to maintain any positive momentum over the past month unless they had credit market support….. -MJ

  67. BEXP – Went through latest presentation, not a lot changed from last one, 6 wells completing now (4 at Rough Rider, 1 in Montana, 1 at Ross). They added the Pale Rider (Roosevelt County) map in the last presentation. Those two producing wells are from FH Petroleum and Zenergy, West, both are tight holes. Sitting on hands but clearly they are gearing the presentation for success and they’ve been completing the well long enough to know what they’ve got on their hands. Will see if they drop any hints this afternoon.

  68. BOP, Thanks for the last IM. What, then in the great mystery of the markets, is holding, driving up equities? Buyng near a perceived bottom, a bounce?

  73. re sd- what are the new terms and what is your call on the stock. buy ard???? or sd????

  75. what was behind GSCo.’s buy rating on SWN last week? I looked for the report but can’t seem to track it down. Unhedged for the most part? growing production?

  76. z — have you seen the “experts say don’t use our name” anywhere out there in the MSM?

  80. Geno – Short covering is best guess, looks a bit extended at the moment. Rig count freezing, maybe falling off a bit, hurricane season just starting up, slow down in all Gulf drilling likely all contributing to shorts worry.

  82. z — #78… didn’t think so. Forwarded to a friend with a buddy at CNBC. Seems like a story they would want to report.

  83. Re 81 – Wish I could say it was attributable to declining conventional volumes but for the most part, you can’t see that in the data yet.

    Market dropping like a stone. Moves like a very thin market. Jumpy.

  87. TED has to turn and go the other direction before I have any confidence equities can beat back the Credit Bears.

    As a friend put it, the Credit Bears see a Continent (Europe) covered with gasoline and they are willing to pay a lot (and push hard) to buy a match. Somebody is gonna lose a chunk o’ lunch money on this trade… time will tell us who.

  88. XACS#1 IM —

    Equities have surrendered a portion of their outperformance this afternoon…and we currently expect equities to continue to trade lower. Parity indicates a SPX loss of great than -15pts at this point. Consumer credit is extremely important to the recovery…and a measure of consumer credit is expected to be reported at 3pm…. We believe some people are positioning themselves in front of this number like Friday’s NFP…if it disappoints the sell-off could materially accelerate…beating expectations might reverse today’s weakness…but unlikely to see a large jump higher….we will find out in a couple of minutes…….

  89. Consumer credit up $955 mm, instead of down $1B as expected.

    Waiting on the Bakken presentation to begin.

  90. Bakken Presentation

    BEXP has 20 wells with 30 day + histories now with average 30 day rates > 1,000 bopd.

    Three Forks well in Rough Rider – looks like 3Q test.

    Montana well – late 2Q or early 3Q results. My hunch is it’s this month.

    …

  96. Ugly slide, extension of May action now. Glad to be sitting on hands a little longer. Sometimes the best action you take is none at all.

  97. Investor Notice: Louisiana-based Law Firm, Kahn Swick & Foti LLC, Announces Investigation on Behalf of Investors Into Anadarko Petroleum Corporation’s Role in Oil Spill Disaster(Business Wire)
    Investor Notice: Louisiana-based Law Firm, Kahn Swick & Foti LLC, Announces Investigation on Behalf of Investors Into Anadarko Petroleum Corporation’s Role in Oil Spill Disaster(Business Wire)

    The ambuuulance chasers are indeed vigilant.

  98. EOG-ordered to halt all nat gas drilling in PA by what I believe to be the state environ agency.

  99. XACS#1 IM — uplifting thoughts….

    Looks as if the SPX might try to catch up with credit. To get there, the SPX would need to get to >-20 on the day. That is what makes it difficult to buy at the close….buyer beware!

  101. Mature, responsible, thoughtful ADULTS have ceased to run this country. The Teenagers are in control.

  104. NG up 13 cents now, running late on the EOG news. While they are at it, they really should shut down CHK and RRC in the play too. EOG is at least as safe an operator as those guys. Sheesh.

  105. Bakken – looks like they are really throwing the technology at the play using Micro Seismic to listen and map the direction of the frac jobs. Use this Tech. down here in the Haynesville/Bossier play.

  106. I’ll be looking at how hard the market hits EOG over this. Down 6% on Friday, down 2% more today. Silly. Accidents happen. In fact, they happen all the time. Before Macondo it was rare to get such a reaction, especially so fast out of a govt. body. COG had some trouble a few months back over some surface pollution. I would guess this doesn’t last long and either way, it’s not at all a big piece of EOG’s position.

  108. It is totally like “SHARK ATTACK” Summer deja vu all over again… only this time with oil and gas wells. Gonna be a loooooong summer.

  109. The blow out in W. Va should have been avoided. Drilling through an old coal mine? Looks like geologist and engineers need to have coffee together sometimes and visit. EOG 1.6km from any house ect… and they shut them down completely in the State? Must have got some input from your teenagers BOP!

  110. Pipeline blow-up in Texas. Guess we need a nationwide transmission shutdown as well

  113. Maybe the Nigerian rent-a-rebels have come to USA to blow up rigs and wells !

  114. Pack – I had wondered why they’d been so quiet. New president over there, I’m sure the honeymoon will end soon.

    Futures up slightly now. Weird day. Worst 2 day loss for the S&P in some time one headline said. Of course, the some time is just this month as there were two big one-two hits in May.

  115. Z, do you plan to exit some june positions this week or more so next week?

  118. Nicky — if we see a rally tomorrow, i will owe you… Big Time! Thanks.

  120. BedTime Market Strategist… a little late….

    Indigestion.

    The market has a serious case of heart burn as it continues to digest Friday’s jobs report. To say the S&P 500 spent most of the session bouncing around the flatline is an overstatement, wobbling is a more apt description. Investors remained cautious and tethered to the sidelines waiting for this correction to provide an indication that it has run its course. Today’s trading action was typical of an environment lacking buyers, not necessarily one of aggressive sellers. Volume was light as buyers remained patient and sellers are not yet ready to press the next leg by. Nobody wants to get caught selling a market down 15%, unless they are confident it is destined to be down 20% in short order. Investors sought other opportunities through which to play the weak environment. It appears as though investors are flocking to Gold in anticipation of a breakout above 1250. Silver also had a bid today, and it would not be a surprise if fast money is shorting Copper for a Texas hedge. We cannot deny that Gold looks very good from a technical perspective, but this all appears too momentum oriented to be attract us here.

    The already weak atmosphere lost additional composure as Apple sold off following the unveiling of the newest iPhone. Now that Apple is just under 20% of the Nasdaq 100, its outsized influence on broad indices is greater than ever. At least once a year, we complain about the composition of this index, and today provided a pretty clear example of the problem. Someday, Nasdaq will wake up and realize that the modified weighting structure of the index is antiquated. The structure was created over a decade ago to temper the outsized influences of Microsoft, Intel, Dell and Cisco in the late 1990s. The irony is in never revisiting the structure as the Nasdaq as a market place has matured, it has created a larger avoidable imbalances. Microsoft and Apple have approximately the same market capitalization and both stocks were down 2% today. Apple is 19.2% of the Nasdaq 100, while Microsoft is 4.62% and as one might expect from such weightings, Apple had 4x the influence of Microsoft as it is costing the NDX 7 points to Microsoft’s 1.7 points.

    Although Apple played its part, it was not the key to the market’s weakness. The shocks of the jobs report created a new round of fear and uncertainty among investors. Anecdotal reports appear as if traders are preparing to make a new round of bearish bets should the S&P 500 break the 1040 support. Instead of playing defense as they have after being caught flatfooted by the jobs report, they want to go on offense if a break occurs. In the meantime, investors have learned that patience works to their advantage as prices push lower and multiples contract. Should a notable break below 1040 occur, the resultant fireworks should create a big opportunity.

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