OPEC says the market is undersupplied by half a million barrels per day, so they cut supply another mbd. Why did they do this?
Helge Martinsen analyst at DNB markets
That’s an easy one Helge, because OPEC wants the price higher. I turned bullish on oil prices in the March 31 column at $74. I suggested crude needed to break above $83 to really turn its trend up. Friday it was $82.78, close enough. I just paid $3.39 at the pump for 87 octane gasoline so the entire complex is moving up. On the chart crude oil has corrected from the $120-125 high last June to about half that at $65. It gapped up on the OPEC news and as predicted does not have to fill that gap. I suspect the market returns to at least $100 if not the old high around $120.
Team Biden’s war on oil is the root cause here for higher prices. Producers are wary of even more penalties and regulations. No wonder Exxon is buying Pioneer rather than drilling for more oil in the Permian Basin.
Nustar NS has moved over $16 and is correcting a bit below $16.
I mentioned that eight stocks are driving gains in not only the NASD 100 but in the S&P 500 as well. This means the other 492 stocks are simply meandering around. Stocks topped from November 2021 to January 2022. A year later the market bottomed in October 2022 a typical seasonal low. We are now six-seven months out from that low or half the time span. The market is on borrowed time and was slipping again Friday.
Other evidence of a market top (rebound) is the dividend yield. Yields are high at market bottoms, usually offering 6% or more. Today the SPX overall yield is 1.66% annually, a mullti-decade low.
The rebound in stocks has renewed the appetite for risk adding another acronym to the lexicon. ODTE are zero day to expiry options. The enemy of any option trade is time decay, the option is worth less as the expiration date draws near. Yet options expiring today now account for 42% of the total up from 22% a year ago. This is risk on steroids.
The S&P has gained an average of 0.3% following any down day this year. That is a record going back to 1927. Yet no index has recorded a new high.
Seasonally the market tends to top around tax day, April 15, and we are there now. Watch Meta, Apple, Netflix, Google, MSFT, Nvidia, and Tesla. Once the selling resumes the party is over and the strong wave down of this bear market will resume. This could easily begin by May. A sharp decline in stocks this far ahead of the 2024 election will certainly alter the odds for the current high in the polls players.
