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Wednesday, October 11, 2017

Market Alert - Pre-Market

Futures vs FV: SP -0.65; DJ +12.32; NASDAQ -1.32

After trying two days opening higher and tossing the gains then having to attempt a comeback, futures are simply starting a bit lower and we will see if bids return again. The pre-market has shown a bid the past 1.5 hours as futures move to the pre-market highs.

The news cycle remains a bit tepid.

Fed: Charles Evans on Bloomberg talked incessantly of a 2% inflation rate. Incessant. He said he 'does not fear 2.5% inflation,' that inflation 'should spend time above 2.5% just as it spent time below it.' It is always trouble when the Fed talks cavalierly about inflation.

Evans shows two things. 1) He still pushes the discredited Phillips Curve model that has not worked for the past 10 years -- and for the prior history of economics outside of about six months in the 1970's. 2) this gives a very sobering view of the Fed's limited thinking on what is inflation. What about sizes declining but prices remaining the same? Quality and durability declines that you pay the same price for? We all learned in basic economics there are many forms inflation takes other than just prices. Remember how the kings used to 'sweat' gold coins by shaking them in bags to knock off bits and dust from the coins? Inflation.

OPEC: After begging the US to control shale oil production, the numbers show OPEC produced the second highest rate of 2017 in September. Look in the mirror. OPEC also said oil cannot likely go above $55/bbl.

IMF: Financial leverage outside banking is now greater than pre-crisis levels. Comforting.

Bonds: 2.337% vs 2.345%. Bonds rallying back some

EUR/USD: 1.1839. Euro remains stronger as it tries to recover 50 day MA.

USD/JPY: 112.19.

Oil: 51.10, +0.18

Gold 1292.80, -1.00

Stocks will open mixed to flat to start the midweek session. There are some stocks that struggled Wednesday on an upside session but most that were lower simply tested. Will see if bids start returning as some stocks are already in solid 1-2-3 pullbacks and RUTX is in a weeklong test.

Jon Johnson, Chief Market Strategist
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