Market Direction Mid Week Update

Market Direction: BULLISH alert issued 6/2/2016

The Organization of the Petroleum Exporting Countries has a preliminary plan that would cap oil production slightly below its current pace, but traders are debating whether it will make a lasting difference.

“Any production restraint is a big deal,” said Phil Flynn, senior market analyst at Price Futures Group.

The 14-nation group of major oil producers is targeting a production cap that would hold output to between 32.5 million and 33 million barrels a day. OPEC’s latest monthly oil report pegged current member output at 33.24 million barrels a day. But the output agreement won’t be completed until at least Nov. 30.

To reach that output target, OPEC members would need to reduce the rate at which they’re producing crude oil.

Read: OPEC reaches understanding on output cut

“This downshift is likely to help” rebalance the global oil market, said Robert Haworth, senior investment strategist with U.S. Bank Wealth Management. But the market will still have to “work through the excess of U.S. and OECD oil inventories.”

“For now our view remains that upside here is limited, with prices above $50 per barrel likely rekindling U.S. oil production and limiting further prices gains,” he said.

The scale of the production cut isn’t terribly impressive, analysts noted.

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The all-time highs since our initial recommendation to go LONG this market. Here is how the markets have performed:

Stock Market Direction Recommendation (6/2/2016)
Dow	up 884.05 points a 4.95% gain	8/15/16
Nasdaq	up 371.52 points a 7.47% gain	9/22/16
S&P 500	up 88.55 points a 4.21% gain	8/15/16

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