MSCI's indexing decision disappoints traders

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Crude has broken out of its recent trading range, and oil stocks are trading higher. They are being helped by the move lower in the dollar in the last couple weeks, and there seems to be a refocus on demand, which appears to be improving.

With that said, energy stocks are certainly not on fire; the main ETF, the Energy Select SPDR Fund,has been on a slow descent for a month. This was at multi-year lows in January. Long-only funds were aggressive buyers, but when those buyers dried up, energy stocks faded. The good news is many feel it's going higher.

Elsewhere:

1) Chinese stocks are trading fractionally positive this morning, including Chinese ETFs that trade in the U.S. MSCI's decision to put off including mainland China in its indexing scheme was a disappointment to many investors. Volumes in the few ETFs that own mainland China (A-shares) had been high in the previous days in anticipation that such a move would be made.

Read More MSCI move to give China stocks a $400B boost

The decision, while disappointing, was not irrational. MSCI specifically said they need more clarity on three issues.

  1. Quota allocation process: Foreign investors still can't buy as much mainland of China (A-shares) as they want to; there is a quota system. MSCI wants assurances that large clients will have access to buy sufficient shares that will cover their needs. It wants "a more streamlined, transparent and predictable quota allocation process."
  2. Capital mobility restrictions: There are still restrictions on capital movement and limits on the amount of money that can be repatriated. The Shanghai-Hong Kong Stock Connect has been very successful, but there are daily limits imposed on trading activity, and MSCI would like to see those limits lifted to reduce trading uncertainty.
  3. Beneficial ownership: In a separate account, there is a custodian that invests stocks on behalf of an investor. MSCI needs clarity from the Chinese that those securities are held on behalf of the investor. In other words,it wants clear title to ownership.