After another pricing pull back of almost 10% earlier this week, crude oil prices rebounded on the back of an unlikely source.
A Spanish deputy prime minister presented a budget. The proposal was hardly earth shattering.
It detailed planned expenditure cuts but provided no details on the other shoe that has to fall – tax increases. Given that a main element in the Eurozone crisis continues to be on the fiscal side, tax increases will have to follow.
The difference cannot be made up only from program cuts. The budget announcement, therefore, appears simply to forestall the inevitable.
Nonetheless, a dry news conference in Madrid was the latest excuse for bulls to take over and drive the oil price (and the markets) higher.
This is merely the latest example of an immediate overreaction to developments.
Yes, it is important that Spain is positioning itself to benefit from the new paper buyout plans being orchestrated by the European Central Bank (ECB).
Unlike the basket case of Greece, the Spanish have made an effort to clean up their act prior to a bailout request.
Next up are the stress test results of Spanish banks. An independent audit show Spanish banks need $76.3 billion.
And while there is some question over whether the test is a valid indicator of overall banking sector weakness, there is no doubt what the government's objective is.
This will not be an across-the-board rescue of the banking sector because Madrid does not want a full-blown rescue from the EIB.
That would put the entire Spanish banking industry under pan-European oversight. Now it may ultimately come to that. But before officials capitulate, they will orchestrate a smaller number of comparatively healthier financial institutions (at least on paper).
This hardly ends the crisis.
But it does indicate that a strategy is taking shape. And that is all the bulls needed to charge forward.
Or to contact Money Morning Customer Service, click here.