DEEDS NOT WORDS

Market participants continue to divest oil length, the sharp rally of Thursday and Friday notwithstanding. Quite simply, the sentiment pendulum unmistakably swung into the skeptical zone about recovery. Still, oil has made three unsuccessful attempts to break below $70 this year. Clearly, this  viewed as a good entry point into the crude market by speculative and commercial interest alike.

However, this floor will need to be supported by improving economic data, without it, prices could easily fall lower, despite any action on OPEC's part. But traders should take small solace from Chairman Bernanke's remarks last week that he wouldn't allow further economic deterioration because he is reaching the bottom of the barrel for policy choices.

Consequently, crude oil prices are likely to stay in the choppy sideways range that has essentially dominated sinceQ2 of last year until Q2 of 2011. Don't look for any innovative ideas from political candidates in the fall and both Democrats and Republicans demonize further deficit spending. Prices will keep pressing lower as the dirge of disappointing economic data continues. Expect the markets to respond appropriately if the President's remarks tonight are just more happy talk.

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