Encouraging developments drove stocks higher this week. Let's start with oil, which, at least for the moment, is showing signs of stability. Earlier this week, reports of rig counts declining and oil producers scaling back production triggered what initially appeared to be a short-covering rally. Many investors wrote this off as a dead cat bounce, but the bounce has held its ground.
When oil prices are falling with no end in sight, it triggers feelings of hopelessness among money managers. Oil prices have long been seen as a barometer for global demand, and regardless of the true causes for oil's decline, many can't help but be apprehensive. Stabilization of prices provides a light at the end of the tunnel, a feeling that perhaps all is not lost.
The chart below shows Light Crude (WTIC). You can see that the recent rally stands in stark contrast to price behavior over the last few months. ... Log in or subscribe to continue reading.