Investors have been puzzled by the markets refusal to rally in light of the recent sell off in oil. Well, the answer is very simple. Oil has not sold off enough to trigger a real rally. Once oil prices break decisively below the $50 a barrel mark, investors will gain confidence that the drop in crude prices isn't a head fake.
Go to this link on stockcharts.com: Oil (EOD)
You'll see from this chart that oil gapped above $50 in late February. This $50 mark now becomes a big test of support. Should oil break decisively below the $50 mark, we could see a sell off that could take prices into the low $40's.
The trigger for the breakdown in oil could come on its own, but I feel there an announcement pending that the oil market already knows about. IE- The strategic petroleum reserves are full, and no more buying is needed.
I don't know what the catalyst will be, but surely something is about to happen. If the stock market does not rally on the sell off in oil,that would not mean good news for the rest of the year.
