Unconfirmed S&P rallies like we saw Monday, often forewarn of just what in fact we got on Tuesday. That’s why I pointed out (last evening) the ‘divergence’ of so many sectors (even the entire Nasdaq Composite too) that weren’t going higher, in what we described as essentially an Oil-led solo-walk rally.

The inability to get things moving; and particularly the renewed story affirming a great difficulty getting even modest potential concurrence on plans to constrain oil supply at an upcoming OPEC + others Oil-producer meeting in Russia (we’ll see if the lack of harmony compels cancellation of that March 20th gathering), was my primary reason of calling for a ‘failing’ Tuesday turnaround rally. 

Clearly it was Kuwait stating they’ll not go along unless ‘every’ OPEC member does (and we know that there are producers who said they won’t but even as it regards Iran, they might revisit that given enough pressure from Moscow); that reminded us that the internal dynamics of the oil market (supply & demand) are not changed; but price came up primarily because of short-covering. That was a reason why we ‘want’ to see $50 / bbl. oil; but might not right away because it is a manufactured rebound (and has been all along). 

In this regard, what lots are missing is that it’s ‘in’ Wall Street’s interest to bring oil higher, and enhance the ability of oil companies to service their bank debts, rather than having those subordinated to bond holder payments perhaps. It’s a complex scenario that varies from case-to-case, but in-general banks are better served if the price of oil advances. Part of the problem with the market until this day was that recently ‘only’ Oil was advancing, which is why short-covering for sure matter, but there was only so much of that fuel remaining before traditional buyers had to show up (they mostly didn’t) or risk oil setting-back somewhat.