I was bullish on the market for the 4 months leading to april. I only switched bearish when i realized oil was in an unsustainable bubble. Russia/China agreement on Iran sanctions made a sudden israeli airstrike impossible. Oil WAS going to dip to 60$--and take the wjole XLE XLB down with it. But that thesis is out the window. This oil spill changes everything. There will be no new drilling expansion offshore. Oil is easily going to 100 this summer. Oil will NOT start negatively impacting discretionary/retail stocks until we get back to the 110-120 level. The SPY cannot crash with oil rising. GS could literally drop 50 dollars, if the massive energy/materials sector cant crash, the SPY cant crash. Its literally not possible, based on the increasingly heavy weighting of commodity stocks.
Crude peaked July '08. SPX peaked ~9 months earlier, and started crashing ~3 months earlier (or even earlier, depending on definition of "crashing"). There is an argument to be made that "subprime" wasn't a cause, but a symptom, and the ultimate cause of the crash in equities was an extreme bull in crude prices.
spinn has the simplest and most accurate view imo. Jeff Rubin has this macro-recession view suggesting oil has nowhere to go but up over time, and may have caused this past recession (which is a naive view to me; really its like a formula one racer saying his engine blew up because the oil was too expensive to change in his car) Phil Verleger has a healthier liquidity driven view: http://www.commodities-now.com/news...go-switch-curing-massive-passive-problem.html
Excellent point. However, we have a good 20-30$ upside before it starts hurting discretionary/retail again. Anyone else want to guess what the panic point will be ? 120 130? 160? Hard to tell.