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I Have Not Witnessed Such a Myopic Destruction During My 30 Years in the Industry.

The Russell 2000 surged 1.8% yesterday on the strength of commodity companies, more specifically the energy issues that rose 6.1%. Unless one has been living in a cave, all commodity companies have been crushed, decimation that has not spared the debt.   Bloomberg writes the Russell 2000 oil companies plunged 7.2% on Monday.  Personally I have not witnessed such a myopic destruction during my 30 years in the industry.

I am long several commodity companies and the rally is a breadth of fresh air as many, including me, are only hanging on by our fingernails questioning every fact and assumption. What is fact and what is fiction?  What is objective information and what is emotional thinking?

As most know the market is punctuated with great times of elation and great times of despair.  In my view fear is a gazillion times more powerful than greed.

Was there a capitulation?  Unfortunately only history can answer this question but I will write I have not felt this much anxiety since 2008-09 when the face of capitalism changed daily.  Perhaps the only concrete statement to make is the commodity entities are vastly oversold and an argument can be made many issues are priced for a very deep recession.

There is little on today’s economic calendar thus trading will be dictated by the headlines.

Last night the foreign markets were up.  London was up 0.13%, Paris up 0.48% and Frankfurt up 0.82%.  Japan was down 2.25% and Hang Sang up 0.16%.

The Dow should open quietly lower.  A large discount ware house chain posted profits that exceeded expectations.  Is the low margin buyer returning to stores, the impact of lower oil prices?  Tomorrow’s retail sales data can be telling.  The 10-year is unchanged at a 2.22% yield.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.