With the crude oil market pulling back and worries about Europe intensifying, today one of the legends in the business sent King World News that discusses the turmoil in Europe, the crude oil market, and the surprise reserve cut in China.

Here is a portion of Art Cashin's note today: Greece And Crude Send Stocks On A Spree – U.S. futures were strong pre-opening as talk of a compromise in Europe and renewed strength in crude had future traders champing at the bit.

When the opening bell rang, stocks shot up much further than futures had expected.  They then continued higher, finally pausing at 10:00.

Stocks churned basically sideways through the morning, retesting, but not exceeding the 10:00 highs.

In late morning, I sent this explanatory note to friends:

Europe and crude are key drivers with a short squeeze in energy groups again this morning.  REITs got punished (10 yr?) but have come off the lows.  European party may run into trouble as Merkel intends to drag her feet to gain leverage.

S&P stopped at 2040 where resistance starts.  Stronger band at 2044/2047.

Keep your eye on crude now that Europe's closed.

After Europe closed and crude moved into the center ring, the short squeeze in oil really came alive.  Stocks followed along in an almost Pavlovian fashion.

Shortly after noon, I sent this follow-up:

Dow rally seems to ebb and flow with almost each tick in crude.  Likely to continue through the afternoon.

Run rate at 12:15 projects to an NYSE final volume of 950/1.03 billion shares.

(The final NYSE volume was 980 million shares.)

From noon to 2:00, stocks moved steadily higher, obediently following oil.  Then they seemed to pause for the next 40 minutes.

Then buyers returned, lifting prices steadily into the closing bell.  The bulls got help from a market on close buy program that ultimately had about $800 million to buy on balance.  Quite a victory lap for the bulls.

The Oil Price Debate – Kristen Scholer who writes well at the WSJ, has an excellent piece this morning on where the price of oil may be going.  Here is a bit:

A confluence of factors – both technical and fundamental – has pushed oil sharply higher since the commodity bottomed Thursday at $43.58. Short covering, a significant drop in weekly rig count, cuts by major oil players in capital expenditures, a large-scale oil worker strike and a weakening U.S. dollar have all contributed to the bounce back.

“We’ve definitely bottomed,” said Fadel Gheit, senior energy analyst at Oppenheimer & Co. “We’re not going to go back to $40 oil. Nobody can make money on $40 oil.”

On Wednesday in Europe, WTI futures for March delivery were trading down to $51.43 on Nymex.

Mr. Gheit says companies’ realizations that they have no choice but to scale back capital expenditures will keep oil from falling further. As companies cut spending, which we saw from oil giant BP PLC Tuesday, it should lead to lower production. That will tighten the supply glut, which has been a main driver behind the commodity’s selloff. Even though Mr. Gheit believes oil has reached a bottom, he says it will take years before the commodity trades at $70 a barrel again.

Analysts at Citi and Bank of America aren’t cheering the rebound. In fact, they’re sounding the alarm bell. Citi warns oil may have to sink below $30 to rein in current production. At Bank of America, analysts see a growing risk of crude hitting $32 in the near term as global oil inventories “build sharply from here.”

Before oil bottoms, Bank of America says the oil market needs to see curtailments in production by non-OPEC members, a cut in OPEC’s output or stronger global demand. While the dollar has edged lower a bit in the past three sessions, it remains near an 11-year high and much of Wall Street is calling for a stronger greenback this year. Bank of America argues that plus higher interest rates and subdued growth will keep prices in check in 2015.

The next couple of months should be fascinating.

Consensus – China's surprise reserve cut brought an underwhelming response.  Second thoughts showing up about how "near" a Greek deal is.  Oil rebound shifts to pause mode.  Let's see if bulls can hold the recent gains.  Stick with the drill – stay wary, alert and very, very, nimble.

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