The recent market rise was fueled by an intended “collusion.” A combination of short-covering, higher oil prices, and what I’d describe as just a planted seed (phony oil-cut story out of the UAE last week). A story which occurred right at the crucial threat to break the S&P 1800 level. As likely intended, that created a ‘double bottom formation’ that indeed while hollow, was critical as occurring not only on the edge of another heavy break risk, but recognized as capable of a sharp rally. This was simply because it was at a last-ditch threshold and if held, would have the capacity to provoke (not so much spark) a sharp rally.

That rally of course was visible as on a dubious basis, so given what really was and is going on in the world, was not widely embraced (still isn’t). It did ease an oversold condition; and (also not likely coincidentally) combined with the most important stimulant (reduced ‘bond’ fear in Europe, combined with a Deutsche Bank (DB) rebound that may be exhausting, but that’s not the point,) which is that liquidity issues were tabled for the moment. Also that softened sovereign sales playing a role in US selling, at least temporarily); allowing the rebound we had. 

Having the lack of any oil deal (even today media reported Iran thinking about it as opposed to reporting Tehran said they would not participate, while the earlier story said it was ‘contingent’ on having Iran and Iraq participate); and nothing at all regarding production cuts (rather than merely freezing historically high levels of course), nevertheless was followed by an Oil rally that we do welcome. 

Late today (Wednesday) a report of a ‘draw-down’ of inventory contributes to a logical expectation for yet-higher oil early Thursday; which we’re in favor of. I’d warned about the risks of selling or shorting oil after it got so low; countering a few firms that were bullish on crude at 100; and bearish as it broke 30.. to me it made no sense at all, even if oil did (or does) go lower in time.    

As to Iran, their very smug approach is a sort of stick-it to producers as much as possible while hoping others curtail production levels, as they’ve not agreed to do. Saudi Arabia probably thought they put Tehran on the spot; the inverse is more likely. I think the point here is that there is no oil deal; but you do have an oil rebound. And you do not have any ‘real’ move to reduce oil production.