Stocks were right at their lows of the day.
In fact, The S&P 500, -1.2% at 1829 was within 1 point of the January 20 intraday low of 1812. Below that it was anybody’s guess on the next meaningful support level. Maybe a big round number of 1800?……..maybe 1782 from January 2014?
Throw a dart!! Throw a couple darts!!
Eurozone markets had lost close to 3% on the day, with many now firmly in Bear Market territory. It was only 2:30 pm and with 90 minutes left in the trading day a lot more damage could be done.
Oil futures trading on the NYMEX had just closed, with the WTI contract barely holding $26 at 13 year lows. Then, the unthinkable happened!!
Oil moved 2% higher in less than a minute. The S&P 500 levitated 10 to 12 handles seemingly without a trade happening. What’s going on? Did the Plunge Protection Team just get back from lunch?
Even Better. Another “unconfirmed” report of a deal within OPEC to cut production. You just can’t make this stuff up!! To say the timing was suspicious is a gross understatement. I mean, we were right at the edge of the cliff. Stocks were ready to collapse.
Oil trading on the NYMEX had been closed for maybe 1 minute!! How convenient. Now the headline reading algos were totally in charge.
I really try not to buy into conspiracy theories, but let’s take a step back and a deep breath or two.
— Paul R. La Monica (@LaMonicaBuzz) February 11, 2016
Two weeks ago we had the report in the Russian news agency Tass that Russia and the Saudis were close to agreeing on production cuts. Nobody believed it would happen, or hold, but “Short Oil” is such a crowded trade, we had a knee jerk rally.
Last week we had an even less convincing story that a Venezuelan official was brokering a production cut deal within OPEC. That got a little more traction and Oil rallied +8% last Wednesday.
That rally didn’t hold either. Clearly Venezuela should stick to futures on bread and milk, and leave Oil to the Capitalists in the room.
OPEC Rumor to the Rescue?
So Thursday afternoon we have this very convenient story that the Oil Minister from the UAE made comments that OPEC was ready to discuss production limits, and perfectly times to hit the news wires within a minute or 2 after the close of live trading on the NYMEX. Come On Man!! Here’s the guts of the story from the WSJ online:
The Wall Street Journal posted translated comments from the United Arab Emirates’ energy minister about whether OPEC members are more open to cutting output.
The minister, Suhail bin Mohammed al-Mazroueifirst, was asked by a Sky News Arabia reporter if it is true that the Organization of Petroleum Exporting Countries members are more open to the idea of a production cut and, if so, that there will be a coordinated cut. “Everyone (in OPEC) is ready to cooperate” on a cut, Mr. al-Mazrouei said.
OK, I get that comments from a UAE Oil minister would carry a lot more stock than the Tass news service in Russia, or a Venezuelan dictator. Clearly the UAE is much closer to the Saudis, but the same official goes on to say that cuts would require “total cooperation” from everyone, something that has never happened in the history of OPEC.
Regardless of the potential legitimacy, the real story here was the uncanny timing of the “Breaking News” at absolutely the most critical time of the day. It’s just a textbook example of the type of event that throws fuel on the fire for both conspiracy theorists and those who look for examples to rant about “the markets being rigged”.
— CNBC (@CNBC) February 11, 2016
I’ve read that R Foster Winans has been working as a “ghost writer” for the last 10 to 15 years. For the sanctity of financial journalism, let’s hope he’s not a reporter for Sky News Arabia.
bogus OPEC headlines are more powerful than the Federal Reserve
— zerohedge (@zerohedge) February 11, 2016
I’m taking Monday off. 🙂