OPEC failed the markets, but a Kuwaiti Oil worker strike came through

It was only a matter of time before the overly bearish supply fundamentals in crude oil were overshadowed by a supply disruption at the hands of Mid-East turmoil. What some believed on Sunday night was the beginning of another precipitous crude oil decline, quickly turned into a sharp energy rally on news of a Kuwaiti oil worker strike. Adding fuel to the fire was a report released this morning by the U.S. Energy Information Administration suggesting distillate stocks (heating oil/diesel/gasoline) experienced small declines. Remember, commodity markets don't need an actual change in fundamentals to turn things around, they just need the perception that it is possible. In other words, crunching supply and demand data isn't going to change momentum.

The direction of crude oil matters to financial futures traders because it is was a big weight on equities earlier in the year. Higher energy prices eases concerns of contagious debt defaults in junk bonds, and could eventually put layed off shale oil workers back on the job.

GDP surprises to the upside, but weak oil futures going into the weekend negates the benefits

Stronger WTI crude oil futures trade overnight, and the flirting of an upside breakout, had the ES buyers in full bloom. However, the crude rally was rejected by technical resistance and later in the day suffered from a smaller than expected decline in operating rigs in the U.S. Accordingly, the U.S. equity indices failed to hold overnight gains.

On a positive note, the second estimate of second quarter GDP was reported at 1%. Under normal circumstances, this would be a disappointment but in today's sluggish environment it could almost be categorized as a blockbuster report. To boot, personal spending and personal income ticked higher along with the final reading of Michigan Sentiment.

This is the first time, in quite a while, we've seen a string of positive economic data. Until now, the trend has been for good news to be followed by bad. Now that data is firming up we have a hard time believing the S&P will revisit the low 1800s any time soon. Nevertheless, the last few trading days in February are normally weak, so we could see a few days of back and filling before heading higher.