The bulls may have staved off the selling effort and led stocks to a small gain on Monday, but it's hardly a cause for a celebration. Volume was once again light, and we can chalk up at least a good chunk of today's "up" to the bounce stemming from a solid two-day drubbing on Wednesday and Thursday of last week. One or two more daily gains this week and we might turn a little more optimistic. Today wasn't a head-turner though. In fact, we saw a suspicious clue not from stocks, but from the S&P 500's Volatility Index (VIX). We've talked about it a few times already, but it's been a while since we've been able to talk about it like this. After weeks of a slow drift lower, the VIX is finally starting to put some pressure on a technical ceiling around 13.0. If it can just keep inching its way higher and move above that line it would actually be a quiet but significant game-changer for the stocks... for the worst. The caveat to the whole VIX analysis is how this week is a key option expiration week (on Friday), which can make things a little squirrelly for options-based instruments and indices; it's possible expiration factors are the only thing pushing the VIX in an upward direction now. I have a hunch, however, there's more going on here than just expiration effects. Let's decide not to make any major decisions right now and instead wait for the chips to finish falling. I'd feel a whole lot better for you as well as for me seeing the bulls put up this kind of fight after stocks found themselves in some more serious trouble. That would start with a move below the 20-day moving average lines at 1921.06. Stick around, 'cause this is going to get real interesting, real fast. The Wave of Economic News Starts on the Right Foot For what it's worth, though we didn't exactly get off to a rip-roaring start with this week's economic numbers we at least got off to a decent start. The industrial production index ticked to a multi-year high level, and capacity utilization rebounded from 78.9% to 79.1%... almost a multi-year high. You might recall a month ago when both peeled back a little we were not alarmed, but concerned. May's data quells the concern. Just so there's no misunderstanding, the capacity utilization and productivity numbers are long-term data and not the kind of thing that should get you into or out of short-term trades. We're bullish in the bigger picture based on the data, but we know full well stocks are capable of pulling back for a few weeks despite the encouraging economic numbers. Don't forget tomorrow's going to be a huge day for economic reports. We'll hear last month's housing starts and building permits along with May's consumer inflation rate. The inflation beast should have been relatively tamed, but we never know for sure until the number is unveiled. Oil Shmoil On Friday we reminded you readers how we read all of the feedback and questions you send in, and when merited, we respond to it here in the newsletter. Well, we got a bunch of great comments and questions over the weekend we're going to try and address this week. One of the most relevant questions we got, however, was this one from Frank. He asks: Your analysis of the markets is excellent. One question: It looks like crude oil is breaking out to the upside. Does that affect your analysis in any way? Thanks for the question, Frank. It's kind of funny you should ask that here, as we've been thinking about taking a deeper look at all the major commodities in some upcoming newsletters. We'll go ahead and get the ball rolling with oil in today's edition. To answer the question over whether or not the rising price of crude oil changes our analysis, the answer is, not really, for a couple of reasons. The first reason is, while the recent rally in crude oil - to $106.91 per barrel - seems troubling on the surface, the bull market has survived worse. As the monthly chart of crude oil and the S&P 500 below illustrates, oil has poked to the $110-ish area three other times since mid-2011 and it's yet to be a problem for the stock market. In fact, it seems like the market heated up when oil prices started to test their upper limits. There's an explanation... the economic undertow driving the price of oil higher is also the same economic engine that's making stocks more valuable. As evidence of how the two correlate with one another rather than have an inverse correlation, just go back in time on the chart. While it's not a perfect correlation, it's a pretty good one. The second reason burgeoning oil prices aren't a huge problem for stocks - it's not apt to last. Like I said above, while crude oil may have made a run on the $110 mark three times in the past couple of years, none of them really went anywhere. In fact, they all pulled back pretty sharply. I have to assume this overheated uptrend from crude oil will snuff itself out just as quickly as the prior three have. The fundamentals don't support higher crude prices. This upswing all has to do with what's going on in Iraq, and to a lesser degree, what's being rekindled in Ukraine. The actual supply, demand, and consumption of oil, however, haven't budged, and shouldn't change much over the next twelve months... at least in the U.S. (though the rest of the world tends to follow our pace). And that's not me saying so - that's the Energy Information Administration saying so in its latest supply/demand outlook. We can reasonably extrapolate our situation to a global level. While some traders seem to think the headlines matter and we'll actually go somewhere other than where the EIA says we will, most traders seem to innately know crude oil can't move much higher from here without a much more meaningful disruption in the supply/demand dynamic. That's just our two cents on the matter anyway, and it's subject to change as other factors change. For right now though, while we feel the market's overbought in the grand scheme of things, any pullback can't be blamed on oil. Here's the thing - with the exception of gold, oil is the trickiest of commodities to trade because far more often than not it's valued based on perception and speculation than it's based on fundamentals. Granted, most commodities (and most stocks for that matter) trade at least based a little on hype and hysteria, but oil is usually little more than a psychological chess match. That's why it's dangerous to use it as a barometer or an anti-barometer for stocks. So what's the right commodity to use as a stock-trading tool right now? I thought John Monroe over at the SmallCap Network Elite Opportunity nailed it in today's edition of the EO newsletter when he named a not-obscure but often-overlooked commodity ETF as a "tell" for stocks. He didn't dance around the issue either, saying "What we can tell you is our line in the sand for XXXXX to suggest a further rise in commodities would be for it to hold roughly $XX.XX per share... A sharp break below that level would likely suggest tame commodity prices on a go-forward basis, which would not only be good for the consumer but the rest of the markets as a whole." Yeah, you guessed it - this is one of those instruments I just can't divulge because it would be giving something away that Elite Opportunity members should be able to expect to keep to themselves. I will tell you, however, those folks who are in the midst of the two-week trial membership to the SCN EO service CAN access all the back issues of the newsletters. If you've been looking to get a real good grip on what the market's doing here, this would be a great time to take those guys up on their test-drive offer. Here's the deal, or cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/ By the way, we've got some new names to add to the watchlist, and a couple to subtract. We'll get to it in a newsletter later this week.