• Oil rose 9%, and stocks fell about 1%.
• China found some scapegoats for its fall, but it is still ahead of where it was a year ago.
• Oil is down again before the bell (for U.S. markets)
• Will we now overshoot on the way up?

When markets want to go down, they will find an excuse. Yesterday the excuse was oil, as West Texas Intermediate (WTI) spiked to their highest level since July 21, finishing at $49.20/barrel. Brent gained 7.2% to finish at $55.39. Oil dragged a rather nervous market sentiment. Before the bell (U.S.), it's down again. People who had been shorting oil are now as frightened as those who were long oil a few weeks ago.

The spike was caused by Energy Information Administration data showing that the U.S. pumped 9.3 million barrels per day in June, down 100,000 barrels/day from May, and 250,000 barrels/day less than estimated just a few weeks ago. The OPEC monthly bulletin also had an article saying the Organization of Petroleum Exporting Countries is ready to talk to non-OPEC states about moderating production to drive prices above costs.

As a result the NASDAQ, which features technology stocks, led the way down, falling 1.06% to finish at 4,776, down 6.39% for the month, while the broad S&P 500 average dropped .84%, or 16.69, to 1,972, and the Dow Jones dropped .69%, 114.98, to finish at 16,528. The Volatility Index or VIX was up 9.14% to finish the day at 28.43.

So Buy the Oils?

Stocks tied to oil also rose, but only modestly. Exxon Mobil (NYSE:XOM) was up 21 cents or 0.28%, to finish at $75.28. Chevron (NYSE:CVX) was up 52 cents, .65%, to finish at $80.95. Conoco Philips (NYSE:COP), which was formerly an integrated oil company before spinning off its refining and marketing as Philips 66 (NYSE:PSX), rose $2.32, nearly 5%, to finish at $49.14. (Philips was up $1.84, 2.38%, to $79.07 on word Warren Buffett had taken a $4.5 billion position in the company.)

The biggest gains were in the most troubled oil stocks. Whiting Petroleum (NYSE:WLL), the leading producer in the Bakken field of North Dakota, rose 9.77% to $19.72. (This was a $90 stock a year ago.) Goodrich Petroleum (NYSE:GDP) rose 9.5% to 91 cents per share. (This was a $21 stock a year ago.) Sanchez Energy (NYSE:SN) was up 8.24% to $6.44/share – a year ago it was over $30.

China Rounds up the Usual Suspects

China’s Shanghai index fell modestly, dropping 0.82%, but the big news was its rounding up of the usual suspects, with 197 people, including one journalist, punished for supposedly calling prices to fall with rumors. (The journalist, Wang Xiaolu of Caijing magazine, wrote a story in June saying the government was looking to exit the market.)

Elsewhere Japan’s Nikkei was off 1.28%, the Hang Seng index in Hong Kong rose .28%, and India’s Sensex was down 0.41%. Europe finished mixed, with England’s FTSE up 0.89%, Germany’s DAX down 0.38%, and the French CAC-40 falling 0.48%.

What About the Tech Stocks? Down Too.

Tech stocks generally fell. Google (NASDAQ:GOOG) dropped $11.87/share, 1.8% to $648.82.Amazon (NASDAQ:AMZN) dropped $5.12/share to $512.89. Netflix dropped $2.60/share to $115.03 and all were falling further in after-hours trading.

There were some exceptions, among the cloud technology players. VMWare (NYSE:VMW), which is holding its annual technology event this week, was up $2.60 to $79.15. Hewlett Packard (NYSE:HPQ) was up four cents to $28.06. Generally, however, the direction was down, air going out of the balloon and getting back into the energy trade.

So What Happens In The Markets Today?

OPEC is now calling the tune. If energy prices keep going up, stocks are going to keep going down. Markets are nervous over a number of other factors as well – slowing global growth, the coming Federal Reserve decision on interest rates, the itchy trigger fingers caused by volatility itself.

Expect a rocky ride.