ZB futures have turned the corner
Energy stocks have likely been holding the market up.
Crude oil, and now natural gas, have made impressive moves higher. As a result, energy companies making up a significant amount of market capitalization and playing a big role in the US economy has been positive. Nevertheless, if crude oil prices come back to reality ($50s?), that will work against stocks.
In our view, the oil market is an accident waiting to happen. A few weeks ago we wrote a piece suggesting the intermediate-term top in oil would likely be somewhere in the mid-to-low-$70s and we still feel that way. Speculators are overly long, seasonals are starting to turn bearish, and the market has probably over-priced supply concern risk premium. Lower oil will likely translate into a lower S&P 500.
We aren't ultra-bears in the stock market but we do think the easy money on the upside has been made. The market looks and feels tired, the weekend trade news celebration was short-lived, and we are seeing trading volume disappear as we head into the summer doldrums.