Led by tech, equities declined. There are numerous uncertainties… the Fed, tariffs, earnings, inflation, political issues including impeachment and other threats, Brexit, etc.

Oil, however, initially rose as Saudi Arabia unilaterally reduced oil exports by 500,000/day in December, calling for other producers to do the same, cutting production 1 million barrels from October’s levels. Gains became losses following the President’s tweet stating: “Hopefully, Saudi Arabia and OPEC will not be cutting oil production.”

As widely discussed, five weeks ago oil was $75 barrel with many firms suggesting/forecasting $100 oil in quick order, partially the result of Iranian sanctions. Last week, crude was down over 20% from those levels because of increased production/shipments. Will prices now rebound by the same magnitude in quick order?

Increased volatility is typically associated with a market top or bottom, a volatility that is today amplified by the massive proliferation of technology-based trading.

Speaking of which, most major equity averages have now retraced over 50% of the post-election surge. Will the late October lows be tested? Will the retail investors who have supported FAANG now become sellers instead of buyers?

Historically, the markets are entering into a seasonal period of strength. The question at hand is what will be the catalyst for a sustained market advance? As noted above, coverage of the multitude of uncertainties is rising.

Consensus believes political gridlock is good for the averages as the odds of any significant legislation being passed are low. I recognize this view but will also write there are considerable issues that the government must tackle but there are always considerable issues to overcome.

Ultimately it is earnings and interest rates that dictate equity direction. Government’s role is to create policies that are conducive to economic and job creation.

Returning back to a previous question, will the averages retest their lows? Bank of America said ‘yes’ based upon several technical indicators. As all know, the markets have been hijacked by technology-based trading where speed and cost of execution are valued more than liquidity and capitalization. The vast majority of these strategies have failed, producing losses anywhere between 10% and 45%.

Are the markets on the edge of yet another iteration, an iteration back to fundamental analysis where geopolitical and macroeconomic considerations are again paramount? If 89% of dollar-denominated assets have produced a negative return as per Deutsche Bank based on current strategies, the answer is yes.

Last night the foreign markets were up. London was up 0.12%, Paris was up 0.38% and Frankfurt was up 0.78%. China was up 0.93%, Japan was down 2.06% and Hang Sang was up 0.62%.