Business

Stocks will likely rally this week for the simple reason that it is options expiration week.

The Fed almost always gives Wall Street extra money to play around with during options expiration.

·      On average the Fed expands its balance sheet by $9.1 billion during options expiration weeks.

·      During non-options expiration weeks, the Fed contracts its balance sheet by an average of $2.5 billion.

Below is a table of the changes in the Fed’s balance sheet. Options expiration weeks are gray.

One month ago, when looking at the latest Bank of America credit and debit card spending data, we presented something that the retailers knew all too well: US retail spending was plunging:

Having told banks and investors "don't panic" in September, amid spiking interbank lending rates and surging default/devaluation risks, it appears the massive shortage of dollars that we warned about in December has washed tsunami-like ashore in oil-producing Nigeria. Following the Central bank's decision this week to halt dollar sales to non-bank FX market operators, black market exchange rates spiked to 282/USD (vs 199 official) and CDS spiked to record highs implying drastic devaluations loom.

Just days after The Fed admitted "we got it wrong" on the "unequivocally good" low oil prices, BP has joined a long list of energy entities slashing jobs. The oil company will cut 4,000 jobs in exploration and production because of toughening market conditions "we need to take specific steps to ensure our business remains competitive and robust."

As Fed's Williams recently admitted:

A little over a year ago, Paul Hodges was roundly mocked when in December 2014 he made a drastic call that "Oil May Drop To $25 On Chinese Demand Plunge, Supply Glut, Ageing Boomers." After oil got as close as 40 cents away from the dreaded 2-handle, Paul had the last laugh.

But the bigger point is that not only is $20 oil not a shocker any more, it is largely expected and could be indeed welcomed, as first Goldman, then practically everyone else has now admitted it is just a matter of time before oil trades to levels not seen since the 20th century.