Oil Spills Or Thrills ?

Once again those nefarious oil traders that had their way with crude oil prices for so long are now feeling the heat. I bet many are saying to themselves: “Darn, I wish the federal government kicked me out of oil while I was still ahead.” The thing now is, when there was rotation out of oil speculators were able to transition into stocks.

Now, immediately upon exiting crude oil, speculators check into a triage center. Of course, for some there's no sympathy for those "mean old people that make a lot of money and leave us small fishes out in the cold," literally and figuratively.

I think Congress has bigger fish to fry and blame for the oil crisis. Oil companies are a much better villain than oil speculators. Those "evil, evil folks" that dare make money in a capitalistic system are facing the burden of subsidizing US citizens' recreational travel, frivolous travel and choice to own gas-guzzling vehicles.

While we’re at this whole notion that American oil companies control the price of oil let's go after the farmer because food prices are so much higher than they were. Lets take it a step even further, the guy who cut my lawn grass should be paying me because the more he cut it the more it needs to be cut, a vicious cycle to be sure, someone should pay for this hellish scheme. I could go on and on with this line of thinking.

Now is not the time to make the largest companies weaker or to vilify them when OPEC is milking this for all its worth, taxes are adding to the pain and supply and demand has shifted markedly over the last few years.

The good news yesterday is that the market held up and displayed a little spunk. The bad news: Stocks couldn’t feed off the nose dive in crude oil to spring it forward. With earnings season winding down one has to wonder what could spark the market higher. Heck, the next employment report is a month off and the Federal Reserve will probably be on pause tonight and for the foreseeable future.

Sure, oil could breakdown and that would help the airlines but the rational for the move lower in crude wouldn’t bode well for stocks. At this point a weaker global economy, while beneficial with respect to crude oil, isn’t the kind of backdrop for massive stock market rallies.

I will say inflationary pressures are really beginning to abate and maybe that could spark or germinate a rebound in equities. Stocks are cheap but that doesn’t mean they can’t get cheaper. Although oil took a hit it held at $120.00 which has become a major support point. By the same token, the S&P 500 failed to cross above its 200-day moving average, a clear red flag. Meanwhile, Oil slipping below $120, has no reliable support till it hits $110/barrel. It's time to grab hold of those greebacks.

The S&P 500 now sees support at 1,240 then it would be highly likely the index would form a double bottom at 1,200. One the upside 1,260 is early resistance but the big move to the upside... the trading trigger... comes with a close above 1,300.