Nell's Trading Notebook: Equities Struggle. Crude Pullback. EU Chaos

12/13/2018 1:24 pm EST

Focus: MARKETS

Nell Sloane

Principal, Capital Trading Group

Stock market bulls are trying to find a way to build momentum, but bears are not giving up, insisting this is the beginning of a much larger bear market, writes Nell Sloane Thursday in her trading notebook.

Bond king Jeffrey Gundlach and several other very respected traders continue to voice their opinion and point to several reasons why stocks will continue to struggle.

The Fed seems to be walking back their hawkish rhetoric a bit.

Crude oil prices have pulled back aggressively the past 90-days, down almost -25%. I believe the cheaper prices at the pump will also help the U.S. consumer.

If oil prices were to continue tumbling, I would probably start singing a different tune. Since the oil business has become so big for the U.S., at some point, lower prices will start to work against our economy, as jobs, debt, and lack of spending inside the sector would create fear and uncertainty.

Moral of the story, we are starting to be a significant exporter of energy, so we can't afford for prices to fall too far. There’s also some talk that tumbling oil prices could create more global stress as tensions in the Middle East will certainly flare. Reuters: IEA sees global oil supply tightening more quickly in 2019.

The market is also paying closer attention to the European Union. UK Prime Minister Theresa May won a crucial vote of confidence in her leadership Wednesday. Winning this vote means her leadership cannot be challenged for another year. But there’s still a ton of uncertainty surrounding Brexit and how it’s all going to play out into the March 29 deadline.

I’ve heard several traders are starting to fear the worst, thinking that Britain’s political paralysis will force it to go crashing out of the European Union without an approved deal. If that plays out, several speculate that it could result in chaos at the ports, major trade complications, empty grocery store shelves, soaring domestic inflation, aircraft and travel complications, and the obvious threat of the economy falling into a knee-jerk recession.

Let’s also keep in mind many large global banks are tied to debt in the UK. I should also note, the markets are paying close attention to the ongoing debt problems in Italy, the massive widespread protests taking place in France, and the fact Angela Merkel has announced she will be stepping down as the German Chancellor. May will not stand for election either.

With the European people now questioning the leadership of Merkel, Macron and May, along with the massive immigration problem and political populism now spreading across the continent, there’s certainly some concerns worth monitoring.

Don’t forget, the European Central Bank released their latest monetary policy decision this morning. The Guardian: ECB halts QE bond-buying program, and cuts growth forecasts Thursday.
Here at home data will be fairly light. Tomorrow we have the latest Retail Sales data and Industrial Production numbers. Next week, it's all about the Fed and the two-day policy meeting scheduled for Tuesday and Wednesday.

Cheers,

Nell

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