Oil Prices Bounce Back From Yesterday's Drubbing

Oil looked like it had maybe topped for a bit yesterday after it fell from $136 all the way down to $131. But today it is bouncing back, buoyed by a favorable inventory report that showed lean supply.

The rise in oil is likely weighing on sentiment today, as energy stocks are higher but the rest of the market is sharply lower. Financials are one of the weakest groups again, as Lehman (LEH) is down again, and the bears are trying to make a run at Goldman Sachs (GS) as well.

There were rumors this morning that GS would announce a massive writedown, similar to what some of the other investment banks have already done. I think given how GS has executed during this credit crunch, and the fact that they have not needed to raise any capital, that this rumor is highly unlikely. I have said that I am itching to add to this name, but I will wait until they report earnings on Tuesday. I am covering the conf. call for TheStreet.com, and will update my blog with highlights from the call.

Ag stocks are also on fire after Agrium (AGU) raised its 2Q guidance by more than 35% and Monsanto (MON) had its estimates raised at UBS. The farmers are having a real rough go this planting season, and I think some may be scrambling to buy more fertilizer for a go at a second planting for the season.

Asian markets were mixed overnight, with Japan higher and China lower again. The dollar is lower today after a nice multi-day bounce. The 10-year yield is also lower, at 4.04%. The VIX is higher, near 23.95, and the CBOE put/call is also very high at 1.25.

I think the elevated put/call and ARMS Index should stem today's selling, and we should retrace some of the early decline by day's end. But I want to see some more positive technical action in the major indexes before putting more money to work.

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long GS