That which is unsustainable, will not be sustained.
I remember the last time Crude Oil and stocks went up quickly in unison while apologists talked about strong housing fundamentals.
2007-2008 Wasn't That Long Ago
Granted, the velocity of the move in Energy markets then and now was very different, so perhaps the comparison is unfair, but we saw very similar moves in early 2011 (but China was growing too quickly and MENA was a problem). We also saw moves like this (equities and energies surging) in early 2012 (Apple was the darling then).
Those didn't end well. Maybe it's different this time.
In early 2011 the US 10 year rallied up to 3.65% (before falling to 1.8% in September following debt downgrade).
In early 2012 the US 10 year rallied up to 2.35% (before falling back to 1.45% in June on European elections and slowing US jobs data).
Oil
August Brent expires tomorrow and the front month Brent v. WTI spread is at early 2011 levels ($3.00 wide). Here's a long-term look at the December Brent vs. December WTI (2013) over time, which is trading $5.40 wide (because of steep term structure in WTI).
US (mid continental) refiners really benefited from the unusually wide Brent v. WTI spread. Serious margin compression going on now.
Take a look at December 2013 WTI vs. December 2014 WTI. The shorter-dated Crude is trading at a NINE DOLLAR PREMIUM (10%) to the longer dated Crude. I agree with Milton Friedman on this one - something probably has to give. In my opinion, options expressions looking for a flatter WTI curve may provide the greatest profit potential over the next 2-6 months. We have been scaling into low margin positions with clients looking for a return to more normal structure over the past week and will continue to do so.
Gasoline/Heating Oil
A couple weeks back we recommended looking for Gasoline to outperform vs. Heating Oil. We are now entirely out of that position and pleased with how it performed.
Broad Indices
The Russell 2k closed at new all time highs yesterday. The broader Wilshire 5000 is a whisper away from the mid May all-time high close (17,599.95) and a rumor away from the May 22 (Bernanke reversal) intraday all-time highs (17,799). You can't make those levels up. It's an algo eat algo world where one tick matters.
Interest Rates
Finally, the stuff that goes on at the margins can become important quickly. If you think surging 10-year rates don't matter take a look at mortgage applications of late. Like Wile E. Coyote over a cliff.