Hello friends and fellow traders, and welcome to the weekend. Unfortunately the market didn't end the week on a wildly bullish note, but in light of the breathtaking rally we saw unfurl over the course of the prior three weeks, we can't be too surprised.... or too disappointed. We'll take a look at the market's action and outlook below, but first, we want to pick up where we left off with yesterday's newsletter and look at the plausible future of crude oil from a different perspective. As a refresher, our gut feeling is that crude oil is positioned for meaningfully higher highs, but not because of OPEC's decision to cut back on its oil output. Rather, oil's apt to move higher -- for the long haul -- because the U.S. dollar is finally back in a position to move meaningfully lower. Yes, this is something we suggested was on the table several weeks ago, only to turn around and see the greenback take flight again, and move to multi-year highs in step with rising interest rates. [The dollar and interest rates generally move in tandem.] Thing is, we think the interest rate rally was overbaked, and we think the dollar's rally based on the interest rate rally was even more overbaked. Now the pendulum looks ready to swing the other direction.... in a big way. Our chart that compares crude oil, the dollar, and interest rates below tells the tale. It's easy to see how crude oil suffered when the U.S. dollar soared. Here's the odd part to notice about the whole thing though - in 2014, the dollar rallied even though yields were falling. For whatever reason that didn't apply then, rates and the U.S. dollar synced up again a couple of months ago [most likely a clear idea that the Fed was aiming to ratchet up its base rate]. Thing is, the damage was already done - the U.S. Dollar Index's rise in 2014 and strength in 2015 didn't jibe with low and falling interest rates during that time. Conversely, we feel the greenback is in a good position to correct that error now, with or without any assistance from interest rates. And that's why we have this funny feeling that oil prices are primed to rally, in step with the falling U.S. dollar. Now, this matters even more than the OPEC thing, and it's going to matter a heck of a lot more in a few months than the OPEC agreement could ever even think about mattering. Just to put things in perspective, OPEC now plans on cutting back its daily production from 33.5 million barrels per day to 32.5 million. Every little bit helps, but that's only about a 3% reduction. It's a cut that means even less when you think about the fact that on a global basis the world is producing oil at a rate of about 96 million barrels per day... and the rest of the world didn't agree to any major production cuts. If it's just OPEC doing the cutting, then production has only been stifled by about 1%. Plus, it's not like OPEC's output cut is a binding, long-term contract. When the oil cartel decided to slow down production in 2009, that cut only lasted in earnest for about six months. A year later, the group's oil output was clearly headed back to pre-recession levels. That's something to keep in mind for later, when OPEC's productivity doesn't remain at stymied levels. It doesn't matter very much. This is all about the dollar at this point, and we think the dollar's rally is done. Just wanted to make sure everyone knew exactly where we were coming from. As far as the market goes, today may have technically been a victory [the S&P 500 finished the day with a tiny gain], but it was the most tainted victory we've seen in a long time. Take a look. While the S&P 500 ended with a small gain, the close was on the lower half of today's bar, and the VIX plowed into a major resistance level around 14.2. The VIX didn't clear that hurdle, but it's in position to punch through. The S&P 500 is also within striking distance of its 20-day moving average line at 2183. The volume behind today's gain was pretty minimal as well. Friday's rally, however -- small as it was -- wasn't tepid buy-in. It was actually a flight to safety, from a more aggressive mindset. Just as a matter of routine, every day here at the SmallCap Network we look at..... well, everything. We usually don't talk about everything we're seeing, just because we want to limit our chats to the "best of" things that matter. In that light, we're going to hone in on one of the more curious things we noticed about today's action just by showing you one of our watchlists.. a look at how each major sector performed compared to the all the rest. Here's that snapshot of just one of our many screens. Utilities led the way? Financials were the biggest loser? Staples advanced, while discretionary stocks floundered? Folks, today wasn't a victory for stocks as a whole. Today wasn't even a non-loss. Today was a flight to safety-sectors, and away from economically-sensitive ones. Maybe it's just a coincidence, and even if it's not a coincidence, this isn't necessarily an indication that traders are thinking a bear market is looming -- it's just a little defense. But, it is telling that traders are starting think defensively. If the market's thinking it now, it's only a matter of time before they really start to trade that way. That's got bearish undertones. Again though, the VIX needs to clear 14.2 and the S&P 500 needs to break below the 20-day line (as well as the support at 2162) before we need to be too worried about it. Of course, that could be happening by early next week. Then the question becomes one of whether or not the VIX and the S&P 500 can be held in check by their respective Bollinger bands. We'll cross that bridge when we come to it though. For now, let's just focus on having a great weekend.