Oil Has Been Trading In Tandem With Stocks.

Okay, this week has been one of those lazy summer periods where thin volume and light participation leads to erratic action in the stock market, right?

As much as I’d like to write of the odd goings on in the market I think it would be a mistake. Thursday, oil and equities moved in tandem, but only after stocks climbed off the canvass. I think it was an amazing session because of the backdrop of angst and fear. Of course the book says that’s when the market typically makes big moves to the upside.

Albeit, stocks were only fractionally higher and the NASDAQ Composite actually closed lower but the rebound from the bottom was impressive. So, what now for an encore? Could oil and equities remain connected at the hip? Remember, stocks enjoyed a heck of a run even as oil began to takeoff a few years ago and only decoupled last year.

If we take the situation with Russia as the only thing that is slightly different as the week has progressed then it's going to be interesting to see how the world reacts to the country's move to halt participation with NATO. On the surface this is a strange sentence anyway. The North Atlantic Treaty Organization was created to combat the old Soviet Union but since 2002 the organization and Russia have been involved in creating a framework for consultation on current security issues. The aim is to advance a number of joint venture projects and hold regular political dialogue. Of course the latest communiqué from Putin & Co was a shot across the bow of NATO with the invasion of Georgia.

I realize this guy is drunk on a combination of absolute power and buckets of oil cash but how twisted is the mind of the Russian leader to actually attack a country ready to join NATO and then ask the west to pick sides? Of course whenever Russia gets antsy the so-called Doomsday clock begins to tick louder and edge toward midnight, that moment in time when man will wipe himself off the face of the planet. I have always been intrigued with the Doomsday Clock but it’s gotten too cute with the inclusion of climate change and bio-security as inputs. It’s only a nascent problem at the moment but we need to be afraid of a newly emboldened Russia led by an ex-KGB bigwig.

So when things get shaky on the world stage there is an asset class that normally increases in value. Gold, which has been a dog of late, came on strong on Thursday. The move in gold gives some legitimacy to the theory that Russian shenanigans were the main culprit for the spike in crude. Of course commodities are enjoying one of their biggest weeks in history and that tips the scale back to the weak dollar being the key factor.