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Editor's Note: This is an abridged excerpt from research sent to subscribers earlier this morning by CEO Keith McCullough. Click here for more information on how you can subscribe to our industry leading non-consensus research.

INSTANT INSIGHT | The Market Returns To Reality - reality

Last week’s equity/commodity rally came on:

A) The lowest volume of the year and...

B) In everything that’s crashed.


Here's another way of looking at last week's no-volume squeeze. The smaller cap Russell 2000 outperformed the large cap Dow at +3.0% week-over-week vs. 2.5%. But heading into the final week of the year, the Dow and Russell are down -1.5% and -4.1%, respectively.

As pointed out in today's Chart of the Day Energy (XLE) and MLP stocks (AMLP) led the counter-trend bounce, up 4.7% and 14.4% respectively. But nothing short of a post-Christmas miracle could jettison them back to break-even territory for the year. XLE and AMLP are still down -22.2% and -31.8% year-to-date.

What did Mr. Market have to say about the rally early this morning? Hedgeye CEO Keith McCullough reviewed what's in store for Oil and the Russell 2000 in a note to subscribers this morning:

"WTI was up +5.7% week-over-week, but is straight back down -1.7% this morning after tapping the top-end of our immediate-term $34.97-38.33 risk range. MLPs were up +14.4% last week, but still down -32% year-to-date."


INSTANT INSIGHT | The Market Returns To Reality - oil reality


"Small cap, debt leverage, and big beta were the best Style Factors in the U.S. stock market last week (and have been the worst all year), so plenty of selling opportunities in small caps this morning with the RUT down -4.1% year-to-date and downside to 1109."

INSTANT INSIGHT | The Market Returns To Reality - russell RUT cartoon

Welcome back.