By Alan Valdes, director of floor operations at Silverbear

Who would have thought it was possible? The OPEC nations “may” have come to an agreement on reducing production. It was reported that OPEC nations agreed to reduce production from 33.2 million barrels a day to 32.5 million to 33.0 million barrels a day.

US crude rallied on the news, finishing the day up 5.3% to close at $47.05. The news also sent the Dow (^DJI) up 110 points to close at 18,399 and the Nasdaq (^IXIC) up 12.84 to close at 5,318. Both European and Asian markets traded higher overnight. But will this deal really reduce the worldwide glut in oil inventories? Maybe … but not so fast.

Let’s take a closer look at this “supposed” agreement. It does not become implemented (if ever) until November. A lot can happen between now and then. According to the Iranian oil minister, Iran would produce 4 million barrels a day, up from 3.6 million a day. Saudi Arabia said it would cut back 350,000 barrels a day. However, as the Kingdom moves into winter, it normally cuts back 500,000 barrels a day as power demand drops.

Libya and Nigeria, which had terrorist attacks earlier this year to their oil production facilities, will be back online producing a million barrels a day between the two of them. And let’s not forget that there are three countries in the world—Russia, Saudi Arabia and the US—that can supply the world’s energy needs for 10 years by themselves—thanks to new technologies, advancement in solar and electric power and more efficient use of combustion engines.

As far as yesterday’s rally, yes, it was nice. However, coming into yesterday, short positions in energy had spiked 30% over the last week. Therefore, my guess would be that there was a lot of short covering going on.

One last point: The fact that we closed US crude at $47.05 means we are still in a downward trend. We must close above $48.00 to technically break out. As they say, “The devil’s in the details.” But so far, this does not look like much of a cut to production. With such a worldwide glut in oil, it’s hard to see oil climbing back into the $60s with this deal.

Friday is the last trading day of the month. Expect to see some window dressing. I would look for a pretty positive day for the markets tomorrow. The fourth quarter has been pretty good to the S&P in the past, with an average gain of 4%.

Third-quarter earnings kick off next week, with the consensus for a negative -0.8% for the S&P 500 stocks. But it will not take much to beat this number. The fact is traders have put 2016 to bed already. Forward-looking analysts state the S&P operating projections will be 133.57 for 2017 and 147.49 for 2018. (Wouldn’t you love to have a job getting paid for projecting 24 months out?)

At any rate, we are closing the month with another good weekly jobs report. The government reported 254,000 jobless claims, which was 6,000 fewer that expected, and brings the four-week average to 256,000—the lowest since 1973. Expect to see traders adding to their portfolios as we leave behind a “not so bad” September!