August was far from a dog this year with a +70 point gain on the S&P or +3.6% making it the second best month of 2014 and the best August in 14 years.

Market Statistics

The charts were favorable for a big gain for the indexes in August. July ended on a large decline and the bottom was formed in the first week of August. The indexes rebounded from the lows and posted an unusual gain for August. The $64 billion question this weekend is what will September bring? Will it be a September to remember? More on this later.

Friday was really light on news of any kind. There were only two economic reports and neither was of much interest to the few people still in the market. The Personal Income for July rose only 0.2% compared to +0.4% in June and forecasts of +0.3%. This was the slowest increase in income so far this year. Rapidly rising tax payments limited the increase in disposable income to +0.1%. Consumer spending declined -0.1% and real spending fell -0.2%. The drop in auto sales was a major reason for the decline in spending. Real nondurable and service spending also fell. A drop in energy prices contributed to the decline in spending but that is a positive event. However, food prices rose +0.3%.

Prices excluding food and energy rose +1.5% for the third consecutive month. If you are confused welcome to the club. Prices are rising but spending is falling. In theory if prices are rising and consumers are buying the same things then spending would rise. However, spending is declining and that suggests consumers are cutting back on spending because of the rising prices.

Consumer Sentiment rose slightly in August from 81.8 to 82.5. That is a significant improvement from the 79.2 in the initial release. That is the largest revision since April 2013 in either direction. In order for the headline number to jump that much it suggests the second half of the month was running at a rate over 87.0 in order to boost the headline average. If that run rate continues we could see a blowout in September. Analysts believe the spike in sentiment came from cooling tensions in Ukraine and the truce in Gaza. Of course since the survey was completed the Ukraine situation has worsened.

The present conditions component rose from 97.4 to 99.8 and a seven year high. The expectations component declined from 71.8 to 71.3.


The economic calendar for next week is chock full of important events. The biggest reports are the ADP Employment and the Nonfarm Payrolls. Both are expected to show a gain of +208,000 jobs. This is where the rubber meets the road for Janet Yellen. She is jobs focused and a big miss or beat could change the Fed's outlook for stimulus.

The ECB meeting on Thursday is going to be huge because Mario Draghi has all but promised a QE program for the EU. However, he has been promising and not delivering for nearly two years now so it is a tossup on whether he will deliver or just keep trying to talk the markets up. U.S. treasuries are rising because investors are expecting a QE event in Europe. A negative surprise could be a shock to the bond market.

The Fed Beige Book on Wednesday should not be a surprise and analysts are expecting more bullish news from the various Fed regions. Should conditions worsen instead of improve it would be a real upset for equities.

The ISM Manufacturing on Tuesday is almost lost among the other high profile events. It is important but no material changes are expected.

Lastly NATO is holding a two-day summit that starts on Thursday. With Russia invading the Ukraine and sending fighters and bombers into sovereign air spaces all around its borders and even into U.S. airspace there will be some serious discussions at the summit but nothing will happen militarily. Even though NATO is supposed to provide a common defense against Russia nobody actually wants to be dragged into a fight. It is the coalition of the weak against the Russian bully.


There are no stock splits for next week. Next up on the calendar that is worth watching is Continental Resources on Sept 11th. UGI is on a pre-split run but the time is too short to play them. CPK has no volume and no trader interest.

CLR closed at a new high on Friday and appears to be making a run for it.


Since almost everyone was at the beach or mountains on Friday the stock news was very sparse. For shareholders of United Therapeutics (UTHR) it was Christmas in August regardless of where they were spending their holiday Friday. Shares of UTHR rallied +28% or $26 to $118 on news of a favorable court ruling over its blood pressure drug Remodulin. The court ruled that drug maker Sandooz can't make a generic version of Remodulin until October 2017. This is not that big of a drug in the marketplace with sales in 2013 of $491 million but it is a big drug for UTHR at 40% of its revenue. Basically they won three more years of roughly $500 million a year in revenue before the competition from generics crimps their sales.


Splunk (SPLK) enjoyed a +19% gain to $54 after it raised its full year sales forecast. Splunk helps companies analyze their Internet data. In the last quarter Splunk signed more than 500 new customers including Nordstrom (JWN), Dell (DELL) and Portugal's Banco BPI. The company ended the period with more than 7,900 customers. Full year revenue forecasts rose from $402-$410 million to $423-$428 million. Analysts were expecting $411 million. Second quarter revenue rose +52% to $101.5 million and beating estimates of $93.8 million.


Veeva Systems (VEEV) rose after subscription revenue soared +60% in Q2. Earnings of 9 cents beat estimates by 2 cents. Revenue rose +53% to $75.7 million and analysts were expecting $69 million. The company raised forecasts for the current quarter to rise +43% to $78.5 million but that was below estimates of $85 million. However, the company raised its profit forecast to 30-31 cents, up +32%, compared to its prior estimate of 27 cents. Analysts were expecting 31 cents.

On the surface it appeared to be an underwhelming guidance raise since they barely met estimates on earnings and were still below on revenue but apparently investors were satisfied since the stock spiked +20% on the news. It is possible that the thin volume simply caught the shorts off guard.


Stifel Nicholas initiated coverage on Stratasys (SSYS) with a buy rating. Stifel's Patrick Newton said Stratasys was his "favorite idea" in 3D printing. He expects annual growth of more than 30%. SSYS recently launched two of its desktop products in about a dozen Home Depot stores priced at $1,375 and $2,899.

Stratasys has been on an acquisition binge with deals to acquire Makerbot, Solid Concepts and Harvest Technologies. Newton said those deals represent a strategic shift that may suggest "additional aggressive acquisitions in the future." He put a $150 price target on SSYS and the stock closed at $120.


Stifel also initiated 3D Systems (DDD) with a buy rating and a target of $65. Separately 3D completed the acquisition of Simbionix, "a global leader in 3D virtual reality surgical simulation and training" for $120 million in cash. The acquisition is expected to be immediately accretive to cash generation and earnings. Simbionix products include 16 simulation platforms with 60+ interventional procedures across 8 specialties and is used in hospitals, colleges and educational facilities in more than 60 countries.


JP Morgan (JPM) was apparently hacked by a team that originated in Russia. There are some that believe this was in retaliation for the Russian sanctions. The initial hack began in June using a major security flaw according to people close to the investigation. Once inside the JPM system they used sophisticated programs to steal "gigabytes" of data almost at will. A routine scan by JPM technicians detected the intrusion and once they found the traces they were able to follow those tracks to the main source of the leak. JPM said confidential customer data was stolen and everyone should be watching their accounts for unauthorized transactions.

The hackers were traced back to Russia but that is not the only source of problems. Chinese, Asian, Middle East, African and South American threats are encountered on an ongoing basis. Iranian hackers are constantly trying to break into U.S. companies to steal engineering designs and financial data. It is much easier to steal the plans for an anti-ship missile than develop one from scratch. U.S. security officials claim there are more than 650,000 attacks an hour from overseas sources. Only a very, very few are successful but it only takes one to do serious damage. Now that the JPM attack has been discovered the hackers are free to release all the confidential data and credit card numbers on the Internet. While the hack was in progress they probably did not release the data because they did not want to alert customers that problems existed. As long as they were continuing to collect the data the hack remained a secret. Now those gigabytes of data will be going up for sale.

Hackers used a software flaw known as a zero-day vulnerability to get past one of the banks websites and then plowed through layers of elaborate security to get to the confidential data. Security experts said this was a feat that was far beyond the capability of normal criminal hackers and suggests a state sponsored hack. JPM could have been targeted because they refused some wire transfers to sanctioned Russian firms and from the Russian embassy. JPM received a lot of bad press in Russia at the time with the foreign ministry calling the blocks "illegal and absurd." The bank was widely criticized by Russian commentators. Russia has used hackers before to attack other countries. In conflicts with Estonia and Georgia, Russia used hackers to crash their communications systems, utility companies and government websites. In 2012 and 2013 Iran tried to hack U.S. banks in retaliation for the nuclear sanctions.


Apple (AAPL) shares closed at a new high at $102.50 after formerly posting September 9th would be the date for the iPhone 6 announcement. When fund managers come back from vacation they are likely to buy more shares of Apple because they will want to have it in their portfolio at the end of the quarter.

Analysts believe Apple may officially announce the iWatch or whatever they are going to call it but it may not be available for six months or more. They need to announce it so they can engage the developer community before it is actually available. Since this is a brand new product there is no software or applications for it yet.

Some people believe this could be the biggest Apple announcement ever. They could announce two new iPhone 6 models, a larger 12.9 inch iPad and the iWatch all at the same time with staggered delivery dates. There have been so many leaks about the products they might as well just get the announcement over with and let the consumer demand begin to grow.


IDC Corp slashed its 2014 global growth rate for tablets to 6.5% from 12.1% because they now expect no growth in North Americana and Western Europe. Shipments outside North America and Europe are expected to rise +12% after soaring +88% in 2013. They now believe the number of tablets to be shipped in 2014 will be 233.1 million. Tablet growth is expected to come from developing markets where the devices with screens less than 8 inches are in demand. Prices are set to decline -10% by year end. The tablet fad is fading thanks to the phones with larger screens and the majority of people that want a tablet already have one. It will take something new in the space like the 12.9 inch model from Apple to produce new demand.

Tesla Motors (TSLA) jumped to a new high after reaching an agreement to create a vehicle-charging network in China in conjunction with China Unicom. The agreement will create 400 charging points in 120 cities at China Unicom outlets. Tesla owners will be able to charge their cars for free at these outlets. Tesla will also build 20 rapid-charging stations that work as much as 16 times faster than normal stations. China is considering spending as much as $16 billion to expand charging facilities and drive demand for clean cars. China's smog is the worst in the world. Tesla already has agreements with Soho China and China Yantai Holdings to setup charging points at their properties around the nation.

China is also considering a fuel tax to slow down the smog problem. By putting a high tax on fuel there will be less driving and less smog. This will encourage drivers to switch to electric cars. China is also considering additional tax incentives for electric car purchasers. Tesla is making a big move into China just as China is making a big push for electric cars.

Tesla's revenue is expected to grow at more than 50% a year over the next five years as they add new models and expand overseas. While the average price target is $40 below Friday's close there are some projections for shares to rise to $325 in 2015.


What is the deal with the drones? Google (GOOG) demonstrated its new drone delivery project in Australia by delivering dog treats to a rancher. Really? Google said it was testing a 5-foot wide single wing prototype drone in Queensland Australia. Commercial drones are illegal in the U.S. and that is why everyone is testing them in other countries. Amazon will be testing its drone systems in Mumbai and Bangalore in late October. Domino's Pizza tested delivering by drone last year.

I believe these are all publicity stunts. I seriously doubt anyone will be utilizing drones to deliver products in my lifetime and I think I have about 15-20 years left. Amazon ships about one million packages a day. Obviously they can't use drones for more than a couple miles away from the distribution center so how many drones can they actually use? In a major city having a drone drop a package on the sidewalk outside a building or apartment is a sure recipe for getting it stolen.

Google and Amazon claim they are going to use them for same day delivery. What item is small enough for drone delivery that is so important that you need it 2 hours after you order it? What item are you willing to go out onto your front sidewalk and wait for after you order it? I could see ordering a few Subway sandwiches for the office lunch but Subway does not have the time or the money to implement that kind of delivery to make a $2 profit on a pair of sandwiches.

I just don't get it but maybe I am too old to see the opportunity. I see multiple employees to manage and fly the drones plus continuing expenses for buying, maintaining and fueling the drone fleet. Liability insurance is going to be a huge expense. Unless you are delivering life saving medicine for big bucks I don't see how the drone fleet will be profitable. To me it will only be a major series of headaches for everyone concerned. I believe it is just a cheap publicity stunt in the Google-Amazon shopping war. Meanwhile Skynet is watching and waiting.


Alibaba is delaying its IPO again in order to answer a new round of questions posed by the SEC. Alibaba was poised to launch its IPO marketing this week but that has now been delayed. The delay was due to questions about the separation of Alipay from the IPO. That is the Alibaba equivalent of PayPal. The new launch date is the following week with tentative pricing on September 18th and trading to start on Friday the 19th.

The IPO is now expected to raise $20 billion and be the largest in U.S. history. Previously the $19.65 billion IPO by Visa in 2008 was the largest. The latest projection for the post IPO value is $154 billion. That is -22% below the prior consensus estimates. Just a month ago a Bloomberg poll found average estimates had a post listing valuation of $198 billion. There are 632 million Chinese Internet users and that number could exceed 850 million by the end of 2015.

Markets

The S&P closed at 2003.37 after trading at 1999 for most of the day. Friday just happened to be the 1999th day since the market bottom in March of 2009. For a while on Friday afternoon it appeared it would close at 1999 on the 1999th day but a burst of buying at the close ended that possibility.

That was a new record close for the S&P and I suspect it came on short covering ahead of the weekend and new positions ahead of what could be a good week for the markets. That assumes a lack of negative headlines from Europe, Israel and Iraq. This was month end and the next three trading days will see inflows of retirement contributions. That should lift the market. The volume on Friday of 4.3 billion shares was slightly higher than the 4.18 billion on Thursday. The volume over the last four days has been the lowest since 2008, excluding the end of December. No volume means no conviction but it was a holiday so that does not really hold true.

I think we saw some decent conviction last week since the markets did not go down after the two week rally. There were enough buyers in the market that every intraday dip was bought. There was no V bottom rebounds but buyers appeared one after the other to slowly push the markets back to positive territory.

A recent survey found that 81% of actively managed funds are lagging behind their benchmarks. With only four months left in 2014 those fund managers are going to have to be proactive to try and boost results or they will see outflows in early 2015 when investors reevaluate their positions. We are moving into the "invest or die" period of the year. Lack of performance means a lack of yearend bonuses and most managers receive the most of their compensation from their bonuses. To make it even more stressful the majority of funds have a fiscal year end at the end of October. That is to allow two months for the accountants to produce the tax documents for the individual investors by December 31st.

Fund managers returning from the holidays will be shuffling their portfolios in an effort to spike their results. This may mean selling some winners and putting that money to work in stocks they believe have the potential for a short term gain.

The VIX is only 3 points from its lows after falling -29% in August. There is no fear in the market and all the recent geopolitical headlines only caused momentary pauses in the rally. There were roughly 3 puts purchased for every call option last week. However, only about 506,000 options on the S&P-500 traded on August 27th and the lowest level since May. That is about 70% lower than traded in the first week of August.

Fear has disappeared and complacency has returned. While it is good that fear has been erased we are not going to be surging to new highs on complacency. The bulls need to come back from the holiday and stampede into the market.

The S&P historically loses -1.1% in September since 1991. That is not the problem. The big problem is that September normally produced a 4.5% swing during the month compared to an average of 3.4% in all months. September is normally volatile.

August is also a volatile month and we did not see that this year. Investors are hoping September starts out like it did in 2013. The S&P hit a low of 1633 on the day after Labor Day and then rallied to 1729 over the next two weeks. That is a +96 point gain. However, a sell off began on the 20th that ended at 1646 three weeks later to erase nearly all the gains. This year investors are hoping to repeat only the first two weeks of gains and skip the -4.8% correction that followed.

The S&P has no real resistance until it reaches 2025 but it is also lacking any strong support until the 100-day average at 1930. There is light support that was built by brief pauses on the way up at 1995, 1985, 1965 and 1950 but none are significant. We may not need any significant support if the dip buyers continue to appear. That theory will probably be tested at some point next week so be prepared.


The Dow is vertically challenged. After a strong rebound from the August 7th lows it only managed a +97 point gain for the entire week. Most of that was gained on the first two days and the rest of the week was a battle to hold those gains.

We were due for some consolidation and I think everyone would vote for that kind of week after an 820 point rebound. Consolidation in place is far more agreeable than a couple hundred point decline for profit taking. This is why I think the market showed conviction. It was a low volume week with plenty of ugly headlines and the Dow still added +97 points. It could have been a LOT worse.

The Dow has support at 17,035 and 16,990 before dropping to 16,600 for conviction support. There are several bands of converging resistance at the 17,100 level and the resistance highs at 17,138. Technically this would be a good place for a bout of profit taking and then a new assault on the July highs. The market likes to climb a wall of worry and the converging resistance is a decent challenge. Once over that level we should be good for several hundred more points. Resistance would be in the 17,325 range and again at 17,500.



The Nasdaq Composite closed at a new 14 year high on Friday thanks to a burst of buying at the close. The Nasdaq has resistance at 4,600 and initial support at 4,550 and 4,515. There were some big gainers on news headlines on Friday that helped to push the composite higher. The +22 point gain on Friday was half the gains for the week. Like the Dow the tech index consolidated sideways all week. I am sure nobody is complaining.



The Russell 2000 punched through resistance at 1165 on Tuesday to 1175 and then traded sideways the rest of the week to end at 1174. Thursday's dip back to 1165 proved that it had turned from resistance into support and investors were not afraid to buy the dip. If the Russell can move over that 1175 level on Tuesday we could see a spring to the old highs at 1208. Small caps are where the action is for fund managers. If they want fast gains over the next two months they need to bet on the small caps. The big cap stocks are stores of money and tend to move slower. Managers can get more short term bang for their buck in the small caps IF the market is going higher.


The biggest challenge to the markets next week could come from the biotech sector. The Biotech Index posted a whopping 6.1% gain for the week of +180 points. The M&A in the sector along with favorable drug news is powering the stocks higher. They were the main reason for the Nasdaq's gains last week.

The index is at a crucial point. The $BTK has broken out to new highs but the various Biotech ETFs are at double top levels. If fund managers decide it is time to take profits and move to something else the biotechs could have a rocky week.



I am bullish for next week assuming we don't have any destructive headlines either geopolitical or economic. On a payroll week you never know because the anticipation or maybe I should say worry is so high. The ECB meeting is also a challenge because there is so much commentary around that expects Mario Draghi to finally announce a QE program. Inflation in Europe has fallen to 0.4% and unemployment is 11.5%. The ECB needs to take action.

Yields on the U.S. ten-year treasury are plunging with our debt seen as the safe port in the storm. If the ECB does institute QE the European debt yields are going significantly lower and the U.S. yield at 2.34% at Friday's close will seen like a windfall. If Draghi fails again to take action there could be a dramatic change in the treasury market and it could impact equities.

Now is the time to refinance your mortgage if you did not do it in 2013.


Random Thoughts

David Trice warned of an impending correction of 30-60% for the S&P-500. Unfortunately he made the same prediction in 2010 and again in 2012. Eventually he will get it right. Trice is the founder of the Prudent Bear fund so that should give you some idea of his mindset. The fund has underperformed the market by 400,000 basis points since 1996.

Another technician, Abigail Doolittle of Peak Theories Research, warned of a 50-60% market crash ahead as the Fed begins raising interest rates. While the end of QE is going to cause some market volatility I seriously doubt it will be a 50% crash.

Russia invaded the Ukraine. Pretty much everyone believes that except those that listen to Putin. He is still denying it. The 1000 special operations forces that crossed the border into Ukraine were humanitarian "volunteers" according to Putin. The 100 tanks, 500 armored personnel carriers, 200 artillery pieces that crossed with them must have been relief supplies.

Putin had a lot to say on Friday.

"No matter what U.S. does, it turns out like Libya and Iraq."

"UN can't be a foreign policy tool for the U.S."

"Fights at UN sometimes fiercer than during cold war."

"European leaders are not showing independent thinking."

"The liberal economic model leads to a buildup of crises."

"Russia is a country that doesn't fear anything."

"Leaders win support by being confident they are right."

"Russia is far away from being sucked into a global conflict."

"Russia is a nuclear power and is strengthening its capabilities."

"Russia strengthens its arsenal to feel safe, not to threaten."

"I don't think anyone seeks a large scale conflict with Russia."

Clearly he was warning the U.S. and Europe not to mess with Russia over the Ukraine invasion. We have returned to the cold war with a military buildup on Russia's side and a constant escalation of tensions.

He also said the satellite pictures of Russian tanks and artillery moving into the Ukraine were not real. He said they are from a video game. I guess if plausible deniability is your forte then any excuse works.

Russia is rapidly approaching a brick wall. More than 24% of the foreign debt of Russian banks and corporations, or $157 billion, comes due in 2014. Sanctions have erased the possibility to refinance that debt. Rosneft, the national oil company has $15.9 billion maturing in 2014 and $16.2 billion in 2015. Rosneft has asked the government to pay its $45 billion in debt coming due over the next 24 months out of its "rainy day fund." The finance ministry reportedly had $173 billion in that fund when the sanctions began. Many other companies have the same problem as Rosneft. Russian banks and corporations owed $652 billion in foreign debt and $650 billion in domestic debt when the sanctions were levied. Half of Russia's capital comes from foreign sources and those have now been shut off with the exception of China and a few other countries that ignore the sanctions. Add in the impact of the flight of capital out of the country and Russia is going to have some serious problems in 2015.

The ECB claims $221 billion in capital left Russia last quarter. Russia must raise $360 billion in new capital over the next 24 months just to maintain 2013 levels. In past years one half of investment finance totals have been raised overseas and is no longer an option for Russian companies. The impact of the financing shortfalls are expected to cause a 6% to 10% decline in GDP. It would not be unreasonable to see a long string of defaults from Russian companies or even Russian debt if Putin follows through on his conquest of Eastern Ukraine.

If the U.S. and Europe really wanted to put pressure on Russia they could kick them out of the SWIFT system and the Russian banking system would collapse. The SWIFT system communicates money transfers between countries. No communication, no transfers.

NATO is holding a summit this week and I expect a lot of consternation among the participants. Ukraine wants to be in NATO but I doubt NATO wants Ukraine to join. The entry requirements would be more than the Ukraine could handle.

Other NATO countries bordering Russia are escalating their military readiness and they will be seeking reassurances from the rest of the attendees that NATO will come to their aid if Russia moves in their direction.

Poland refused over flight permission for the Russian Defense Minister and his plane had to turn around and return to Bratislava where he had been attending a 70th anniversary of the Slovakian national uprising. In retaliation Russia denied over flight permission for the Romanian Prime Minister's plane.

Russia has now closed 12 of the highest profile McDonalds restaurants for "health reasons" in what is clearly a retaliation for the sanctions. Russia is highly publicizing the "health reasons" claim in an effort to cause customers to avoid the other 440 stores in Russia. Initially they blamed nutrition violations on the menus but that did not cause the desired impact so they changed it to health reasons.

In France 1 in 6 people have a favorable view of ISIS. A survey showed that 27% of 18-24 year olds had a positive attitude to ISIS. 22% of 25-34 year olds and 20% of 35-44 year olds were favorable to ISIS. The reason for this is that a growing number of Europeans are from predominantly Muslim countries. More than 1,000 and as many as 2,500 Europeans have traveled to Syria and Iraq to fight with ISIS. The U.S. claims more than 500 citizens have left to potentially fight for ISIS. Some believe it could be a lot more but they took round about routes to get there to disguise their destinations.

Home prices just hit a 70 month high. Unfortunately home price appreciation is slowing in more than 65% of U.S. markets. Future annual appreciation is likely to be in the 5% range and what is considered normal. Incomes are not rising and credit is still tough to get. The low interest rates are no longer creating a surge of buying. The boom is over.

The intelligence community has noticed a significant increase in chatter among Islamic terrorist organizations overseas both on the Internet and on phone lines ahead of the 9/11 anniversary. Terrorists like to use key anniversary dates to remind us they are still there. Experts warned that they cannot pinpoint where or win an attack could take place but the increase is similar to that seen prior to 9/11. With ISIS kicked out of Al-Qaeda it would not be unreasonable for ISIS to attempt a large attack on the U.S. as a bragging chip that shows they are superior to Al-Qaeda and can successfully attack the USA.

On Thursday Judicial Watch warned that agents of Homeland Security, Justice and Defense Dept agencies had been placed on high alert concerning an imminent terrorist threat coming through the southern border. (LINK HERE)

Reportedly the Feds warned that ISIS was operating in Juarez and were planning an attack with car bombs and improvised explosive devices. Intelligence officials picked up radio chatter indicating the terrorist group is planning to "carry out an attack at the border" and it is "coming very soon." The commanding general at Ft Bliss in El Paso confirmed he had been briefed on the warning.

There was another headline on the news in the middle of the week about ISIS instructing U.S. operatives through the Internet on suggested targets of opportunity such as shopping malls, sporting events and high traffic business districts. The warning ran for a couple hours on TV then was completely erased from mention on any station. I suspected at the time that Homeland Security had it pulled from the airwaves in order to avoid a panic.

An ISIS laptop captured in Turkey had files describing how to build bubonic plague bombs as well as other biological weapons. There were 35,347 files on building car bombs, disguises, instructions on how to fight, how to hide in plain sight, speeches by Osama Bin Laden, etc. It was a veritable instruction manual on how to be a terrorist. After browsing the files the military experts warned it was obvious ISIS was going to target countries other than Iraq.

The tanker United Kalavryta carrying $100 million in Kurdish oil disappeared in the Gulf of Mexico last week. It had been anchored offshore as the result of an Iraqi claim the oil belonged to Iraq. A court order to seize the oil had been issued. However, after a month of court battles another court threw out the seizure order on Monday saying the court lacked jurisdiction because the tanker was anchored 60 miles offshore.

The day after the order was cancelled the tanker disappeared. The Coast Guard said the tanker probably turned off its transponder and went black and headed back out to sea. Without lights or a transponder even a million barrel tanker is hard to find in the ocean. Multiple tankers carrying Kurdish oil have turned off their transponders so they can disappear into the global waterways and unload their oil away from prying eyes. This is done to prevent Iraq from knowing who bought the oil and suing to be compensated.

Bullish sentiment in the weekly AAII Sentiment Survey rose +5.8% to 51.92% and the highest level since December 26th. Bullish sentiment has risen more than 20 points since the 30.89% reading on August 7th. Sentiment this high has only been seen 5 times since January 2011. For a contrarian that is a bearish signal.

Enter passively and exit aggressively!

Jim Brown

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