August 31, 2016, 4:00pm EST

We watched oil closely earlier this year.  The oil price bust ultimately pulled down stocks.  And when oil aggressively bounced off of the bottom, stocks recovered alongside, returning to new record highs.

Today it was oil again.

Stocks oscillated near record highs and following an anticipated Fed event last week had continued to tread water.  That gives the bears a low risk trade to sell the S&P 500 against the top (as a take profit, hedge or just a trade), holding out hope that gravity would take hold.

It hasn’t happened.  But we did get a catalyst to get it moving lower today, with a bigger than expected oil inventory build.  That sent oil down nearly 4% on the day.

Oil stocks took a hit.  But the broader stock market held up well, losing just 1/2 percent and recovering most of it by the day’s end.

The market still sits at critical levels going into the jobs number on Friday.  Yields continue to chop in this ever tightening wedge (below) — a break looks certain on the jobs number.  This is a very important chart.

And stocks are positioned close enough to the highs to encourage some profit taking (if the highs get taken out, you put the position back on … if the highs hold, you may have an opportunity to buy it back cheaper).

It remains a macro story – a central bank story.  And that’s the mindset of the market as we head into the end of what has been a rather sleepy August.

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