The news this week that some OPEC members have at least agreed to talk, and possibly freeze production, had traders covering their oil shorts, sending crude up over 15 percent. But why should simply freezing production at multi-year levels stem oil's price decline?

Naysayers are right when they argue that holding production where it is does not solve the oversupply problem in world energy. At the present rate of production, an additional 330 million barrels of oil (or about 1 million barrels/day) of unneeded oil is flowing onto world markets.

That oversupply has been building for a year or more. It is being stored in spare oil tankers, storage tanks and wherever else suppliers can find to stockpile the stuff. And storage capacity is close to being filled, despite the winter weather in the U.S. At most, freezing production solidifies an extremely negative supply imbalance.

As usual, not all is what it seems when reading the headlines, especially when it comes to the politics of OPEC and the Middle East. Remember that up until now, OPEC's largest producer, Saudi Arabia, as well as Russia (the largest non-OPEC producer) have not even discussed global energy oversupply. The fact that they are now willing to talk and possibly freeze production could be an important first step in a possible solution to the firestorm of falling prices that has done damage to both countries and their finances.

Bears point to the fact that oil producers like Iran have no intention of freezing production. The global embargo on that country's energy exports, imposed over Iran's nuclear program, has only now been lifted. Prior to 2012, Iran's oil production amounted to about 2.5 million barrels a day. It now produces about 1.1 million a day. The country's government is dead set on regaining that lost one million barrel a day production as fast as it can. Energy experts believe it will take the country six to 12 months to achieve that goal.

It is here that the plot thickens. Let's, for the moment, believe that the big producers are serious about stopping oil's decline. Talk of freezing production might accomplish that on its own. However, boosting prices is going to require production cuts. Iran won't go for that and everyone knows that the Saudis and Iranians have larger problems than oil.

Syria has become a powder keg between these two opposing forces. Sunnis and Shiites are lining up for what could possibly be armed conflict in that country. If a deal could be worked out to both parties' satisfaction in energy, could that also be a first step in reducing tensions elsewhere?

How could this be accomplished? Since it will take Iran at least until the end of the year to rev up production, could Saudi Arabia persuade Iran to slow down its capacity drive for a few months in exchange for higher prices? The Saudi's, along with other nations, could cut production in exchange for a few, newly-found "production delays" by Iran.

For the world's energy producers a cut would only require each of the top producers to reduce their output by 100,000-200,000 barrels a day or so in order to balance global supply and demand. That could easily lift price levels to $40 or so per barrel. In that scenario, everyone wins.

Clearly, investors are praying for such a deal. The price of oil and the level of the stock market are connected at the hip, so where oil goes, so goes the stock markets. Any deal, however, is not going to happen in the short-term.

Given the extremely short time horizon of traders, I would expect that the oil price will fall again when a deal isn't announced this week. That is unrealistic, in my opinion, but if we do bounce off the lows again, I think my thesis and OPEC's poker game may have merit.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

This week was a little more promising. At least it was better than going down almost every day, as we did last month. Is this a pause or can we expect something more?

Something more is my bet, but whether it is up or down largely depends on the direction of oil. I did notice, however, that there were days this week that the oil price was not in lockstep with the markets. There was even talk that stocks and energy prices might decouple in the weeks ahead. Whether that is wishful thinking or a possibility will take more than a day or two of evidence.

I have insisted that no one knows where the bottom is in oil. Yet, a consensus seems to be forming that $30 a barrel, (give or take a few dollars), is where traders are willing to take a punt and buy energy. That may be true and I hope it is because that would mean the downside for stocks are limited. I still expect the S&P 500 Index to re-test its low of January. That would set us up for a nice rebound into March, but so far it has not happened. Instead, it appears we have established another trading range between S&P 1,875 and 1,920. We are close to the low end of that range right now.

Investing is a game of patience. Most of us do not excel when it comes to practicing that virtue. We want the pain to go away now. It is most tempting to just get out, but the truth is that the pain is simply replaced by a high level of emotional stress. You feel an increasing level of anxiousness as you worry about when to put your money back in the markets.

In the meantime, the daily "noise" continues. There is an increasing chorus of "recessionists," who worry that the economy is rolling over and it's all the Fed's fault. The January jobs report today did nothing to dispel that gloom. Nonfarm payrolls increased by 151,000, well below expectations of  190,000 new jobs gained. The unemployment rate did drop however to 4.9 percent.

Recall that I have been closely watching the rate of increase in wages. It is an important inflation variable for the Fed in deciding when and how much to raise interest rates. Average hourly earnings increased by 12 cents or 0.05 percent. That leaves the year-on-year wage gains rate at 2.5 percent, still far below the average. I doubt the Fed will hike rates until that number goes appreciatively higher.

Investors, however, are in an irrational state of mind where bad news is bad news and good news is also bad news. And so the disappointing jobs data forced markets lower. You would think that if traders were really worried that more interest rate hikes would hurt the economy, than weak employment data should have been good for the market. It is just another instance of a technical driven market.

One thing that I will be watching this weekend is China's expected announcement of their foreign exchange reserves. Supposedly, China's currency, the yuan, has seen more than $1 trillion in outflows since summer 2014. Chinese investors, worried about their economy, have been fleeing the yuan. They have been buying other currencies, especially the dollar, which they believe is a safer haven for their money. As a result, the dollar has strengthened and that's bad for our exports and the companies that sell them.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The funny thing about declining stock markets is that when they last more than a couple of weeks, talk of recession starts to percolate among investors. It is no different this time.  

I have written before that the stock market has erroneously called six of the last 13 declines as recessions, meaning that weak stock prices do not necessarily herald a weak economy. There have been instances in the past where a prolonged decline over a year or so has contributed to a recession but even then the data is not conclusive.

There is no evidence thus far that the U.S. economy is rolling over. Economic data continues to be spotty, which is consistent with a moderately growing economy. Unfortunately, how that data is interpreted depends on the mood of the investors. When sentiment is extremely bearish (as it is now), every disappointing data point becomes fuel for those predicting a recession.

When markets are up, investors take a "cup half-full" approach and focus instead on the positive statistics. There is no question that our present growth rate (when compared to past recoveries) is below par, running at a moderate 2.25 percent rate. Historically, we should have expected a year or two of 3.5 to 4 percent growth by this time — five-plus years into this recovery cycle. But those expectations have not been met.

There are several explanations for why this economy has had such a mediocre recovery.

Some argue (including the Federal Reserve Bank) that although the Fed did all in its power to stave off depression and grow the economy, without help from the government in the form of fiscal stimulus, they were fighting with one hand behind their back. History and noted economist Paul Krugman would agree with that explanation; also recall that for at least the last six years, Congress has been cutting spending, not increasing it.

Then there is the demographic argument, which says that the Baby Boomers are retiring and therefore both productivity and economic growth are slowing as a result. In exchange, younger workers, who are less skilled and some say less productive, are not qualified to fill these vacant, high-paying skilled jobs. As a result, there are more minimum-wage workers earning far less than their parents. These new workers, so the theory goes, simply do not have the wallet-power to propel the economy to a higher growth rate. Since consumer spending is such a large part of our economy (over 70 percent), they have a point.

There is also the argument that 2008-2009 was no ordinary recession but rather a credit recession similar to the Great Depression of the 1930s. As such, the economy requires a much longer period to get back its mojo. Recall that the Depression required 10 years and World War II to recover fully.

Others argue that the end of monetary stimulus and the Fed's actions to tighten interest rates will cause a moderate economy to weaken and ultimately fall into recession. They point to the previous quantitative easing efforts that worked only until the Fed discontinued their use.

Each time the economy weakened (as did the stock market), and this time won't be any different. Time will tell if they are correct, but so far the evidence does not bear out their concerns.

There are several other arguments, including a hard landing in China that will drag the rest of the world's economies with it, but none of this appears to be showing up in the data.

Instead, we are roughly at full employment with further job gains expected. The world economy continues to grow, again moderately, but growing nonetheless, as is the United States economy.

What might change my mind is the one variable that has signaled a recession 100 percent of the time — an inverted yield curve in interest rates.

Normally, interest rates are higher the further out you get in the bond world. A 30-year bond has more risk (and therefore a higher reward in terms of interest rate) than a 10, 5 or one-year security.

Recessions have always been preannounced when short-term interest rates climb higher than long-term rates. There is no evidence of that. And until we see it (if we do), I would advise you to ignore all this noise about a possible recession.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Since the beginning of January, many investors have sold their holdings in the stock market and are sitting on the sidelines in cash. Is it too late to sell, or would selling out be a wise move?

Well over $7 billion was sold from U.S. stock funds thus far in January. In December, $48 billion exited stock funds. In hindsight, anyone who sold at the end of last year would presumably be sitting pretty, but that's not the case at all.

There's an old saying "I'd rather be out of the market wishing I were in, than in the market wishing I were out." Those are words that surely resonate with most investors right now. And as the financial markets worldwide continue to oscillate up and down a percent or more each day, more "long-term" investors are finding themselves on the threshold of selling everything.

This is not a new phenomenon. In 2011, 2012 and even in 2013, I have had many discussions with clients and readers who were convinced that "this time" the sell-off would be equal to the carnage we experienced back in 2008-2009. And every one of those so-called investors who sold out not only incurred real losses (usually at, or close to the bottom of the markets). They then sat for weeks or even months in cash, only to finally put their money back in the market 10, 15 or even 20 percent higher from where they sold.

The truth is, going to cash is much harder than it looks. The big issue you have is that you have to be right twice. Take today's market; we have already declined almost 15 percent from the historical highs of the market made back in May. If you instead measure the decline thus far this year, the total is almost 10 percent. One could argue that most of the declines are already behind us.

So you need to ask yourself, why you are selling. If you are getting out because of a panic reaction to a declining market, then the chances are pretty high that you have made your first and worst mistake. The second part of your decision is when you decide to get back in. If there is high volatility in the markets (like now), that decision is compounded.

Markets have been rising and falling 1-3 percent daily. Let's take a hypothetical investor who sold last week when the S&P 500 Index hit an intraday low of 1812. The index then bounced all the way up to 1,907 in three days. You obviously made a mistake in selling, so what happens now?

Typically, you won't buy back in after the market just gained 100 points. Instead, you say to yourself that I'll wait until there is a pullback and then I'll buy. The market does just that, but does not go back to the lows where you originally sold. What to do? The typical investor will wait, caught between fear and greed, with no disciplined approach to getting back in. They tend to wait and wait until the markets climb so high that emotion takes over once again. Mistake number two.

Unless you are an astute investor, who knows something the rest of us doesn't, it is way too late to sell this market. The risk reward ratio is completely against you. If you want to reduce risk in your portfolio, wait until the markets come back and then adjust your investments more conservatively until you can live with the ups and downs of the markets. Until then, hang in there.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

It had to happen at some point. The averages declined almost every day for three weeks in a row, so a relief rally should be expected. The question is will it continue?

Unfortunately, that depends on the price level of oil. The bounce in stock prices that began on Wednesday was directly related to the bounce in oil. Oil has gained over 10 percent in just two days. Traders believe we still have not seen a bottom however. No one knows when and at what price oil will finally bottom. Until it does, stocks will be held hostage to the energy market.

No one knows when and at what price oil will bottom. Until it does, stocks will be held hostage to the energy market.

In the meantime, everyone has a theory for why the global markets have had such a tumultuous three weeks of declines. Some are saying that the markets are predicting a future event, most likely a global recession. And that it is simply not showing up yet in the economic data. The problem I have with that line of thinking is that the stock market has not been an accurate indicator of recessions (predicting the last nine out of five recessions as an example).

China is another worry. Investors fear that the Chinese government will continue to devalue their currency, the Yuan, causing a currency war while somehow slowing the growth of their economy even further. No question that the Chinese economy has slowed and is presently growing at "only" 6.8 percent, but from a much larger base.

Then there are the Fed heads who are blaming the decline on our Federal Reserve Bank, as if a quarter-point rise in the Fed Funds rate could remotely impact the strength of our economy let alone that of the global marketplace.

Since none of these arguments make the least bit of economic sense, in my opinion, I have to believe that what we are going through is a technical correction. As such, there is no use in trying to come up with the reason for this sell off.  Markets, on occasion, need to pull back to a level where buyers once again appear. At some price level investors will perceive that there is real value once again and then the correction will be over. Have we reached that level?

It's hard to say. I have written that we have been overdue for a 20 percent correction. The last one was in 2011. If we measure this pullback from the highs of last December, we have declined about 13 percent on the S&P 500 Index. On Wednesday, for a brief moment, that index touched 1812. That was eight points below the support I talked about in my last column. It rallied from that level and we are still climbing as of this writing.

However, neither the NASDAQ nor the Dow Jones has yet to hit their August/September lows. That can be taken two ways. Either there is more downside to come or the bulls will argue that the other averages have not confirmed the lows of the S&P 500 (a positive divergence). My opinion is that we most likely have more downside before all is said and done, but from what level?

That depends on oil as well as stocks. The S&P 500 Index should at least reclaim the 1,900 level, if not higher. After that, depending on the data, I am guessing we re-test the lows of this week before I can sound an all clear in both markets. I am guessing we re-test the lows of this week. Don't even consider selling anything at this level. This is a time to be buying not selling because I fully expect markets to recoup all of their losses in the months ahead.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.