There has been a shift in the market that started on Thursday.

Through Thursday, the formula for what the stock market was going to do was REALLY easy: If oil prices are going higher, then the S&P 500 is moving lower. If oil prices are moving lower, the S&P 500 is probably going to move higher.

That shifted on Thursday, when oil prices were MUCH higher and yet the SPX managed to close the day up somehow.

Look at the move from Thursday, if that happened 3 weeks ago the S&P 500 would have been down 3 or 4 percent Instead the S&P 500 rallied from down near 100 to up on the day. On Monday we got much of the same, energy was stronger, and the S&P 500 closed higher.

Then, talking to Tim Colby this morning on the State of the Market Show (free every day at 10 AM) I realized that I might have been looking at the wrong oil. No I do not mean Brent instead of WTI, what I meant was the expiry.

There is real pressure on oil… but that demand is being derived from the cash market that is trying to actually buy oil. The expectations of where oil is HEADING in the near future is not going from that contract: it's coming from July, September, and months beyond that.

This is a chart between the spread of May WTI vs July WTI:

Notice how that spread is exploding higher, that is because the bulk of the strength and demand for crude is coming from the very front of the futures curve.

Why is this important? Because if the S&P 500 is looking past May futures, that changes the entire dynamic of the market and makes the price behavior of SPX around a peace deal, not the price of a barrel of oil on the street.

That said, we are still very news driven and short dated is the way to trade this market.

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Mark Sebastian