HOW IT ADDS UP...IT DOESN'T!

The market's tepid move upward after the sharp decline last week demonstrates that the near-term outlook is still skewed to the downside, especially with a continuing stream of macroeconomic data displaying more signs of slowing.

Crude oil prices are now where they were a month ago, and the intermittently halting signs of economic recovery will ensure that rallies will go only so far. Ergo, sideways trading will probably be contained between $75 and $78, at least until the run-up to the Labor Day holiday.

The Commitment of Trader's report showed that the speculative community's view on the complex has dimmed as length in refined products contracted. Interestingly though, speculative length in crude oil rose. This phenomenon is probably a consequence of an expected rise, later this year, in demand from emerging markets accompanied by limited supply growth.

Industrial production and housing starts data should be under the spotlight this week as market participants parse these numbers for the next directional cue. The latest exogenous influence has now become currency valuation, particularly the euro, and what its shrinking value says about energy demand growth.

In the final analysis though, it will be about the viability and sustainability of recovery, and there is precious little in the data that suggest either.

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