Why does the market just go straight down whenever the oil futures go lower? TheStreet.com's Jim Cramer says.

A market driven by the price of oil -- good when it goes up and bad when it goes down -- is way too binary to profit from. Yet that's where we find ourselves and it is so counterintuitive as to be unnerving.

I think the fact that oil is struggling and failing to take out $60 is a good sign. The purchasing power of Americans is dependent upon jobs, expenses, psyche, interest rates and the stock market. We know that the stock market isn't our friend or our enemy, interest rates are still our friend, jobs are awful, and psyche seems like a push because the love for President Obama is still in the air.

TheStreet.com's Jim Cramer says people got too positive last week -- remember, this market is still awful.

A week ago it all seemed so inevitable. The bulls were in charge. The worst was over. I had to go on The Today Show, and I knew I would once again be asked about the call I made about how the stock market simply isn't going to be the place you want to invest in for money you really need, part of the radical re-evaluation of an asset class turned reckless, dangerous and joyless.

Worse, we had been up for four straight days, and there was a lot of that painful chatter about how "as goes January, so goes the year."

I found it all painful. This is a market that lets you divine no conclusions whatsoever about short-term performance of the market. It is true that we had solved the black holes of Wall Street, but Main Street's just beginning to haunt people, and that has the ability to derail Wall Street once again.

Financial Select Sector (NYSE: XLF) closed at $13.69. XLF October option implied volatility is at 175, November is at 123; above its 26-week average of 41 according to Track Data, suggesting larger price fluctuations.

SPDR Gold Trust (NYSE: GLD) closed at $89.90. Gold is recently up 3.99% to $921.90 according to Bloomberg. GLD October option implied volatility is at 62, November is at 53; above its 20-week average of 30 according to Track Data, suggesting price movement.

Oil Services Holders (NYSE: OIH) closed at $97.60. Crude oil futures are recently down 4.98% to $82.28 according to Track Data. OIH holdings include BHI, BJS, DO, ESV, GRP, GSF, HAL, SLB, HC, NBR, NE, NOV, RDC, RIG, SII, SLB, TDW & WFT. OIH October option implied volatility is at 120, November is at 102 above its 26-week average of 39 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Financial Select Sector (NYSE: XLF) is recently trading at $19.50 in pre-open trading, below its close of $21.15 Friday. XLF September straddle is at $1.90, October is at $3.59. XLF September option implied volatility is at 100; October is at 66 above its 26-week average of 38 according to Track Data, suggesting larger price fluctuations.

Oil Services Holders (NYSE: OIH) is recently trading at $157.80 in pre-open trading, below its close of $164.21 Friday. Crude oil futures are recently down 5.51% to $95.60 according to Track Data. OIH holdings include BHI, BJS, DO, ESV, GRP, GSF, HAL, SLB, HC, NBR, NE, NOV, RDC, RIG, SII, SLB, TDW & WFT. OIH September option implied volatility is at 55, October is at 45 above its 26-week average of 37 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

I am the Global Editor at MoneyShow.com and each week I interview an investing expert. This week, I spoke with Sam Hopkins, editor of Energy and Capital, who despite the recent sell-off in energy, sees potential in energy.

Q. Sam, in a recent piece on the Russia/Georgia conflict, you cautioned your subscribers to watch their Russian shares closely, but to hold onto their energy shares. Would you expand on that advice?

A. Well, we see a mix of geopolitical risk and opportunity in the flare-up between Russia and Georgia. Ironically, the opportunity for energy investors comes from the risk itself. It's hard to put your finger on exactly how much the "risk premium" in a barrel of oil is (meaning, what dollar amount is priced in to accommodate for pipeline leaks, theft, war, or other factors that can affect supply). But what we do know is that in Russia's case, as one of the world's top producers of hydrocarbons, national oil and gas companies stand to gain when futures prices rise. In this way, Russian energy stocks like Gazprom (OTC: OGZPY) and Rosneft (OTC: RNGZY), both of which trade in London and here on the Pink Sheets, may gain even while the broader Moscow market turns downward.

Q. Many investors may view this conflict as an example of why international markets may be too risky for their money. After all, the Russian stock market - the RTS - has fallen about 20% in the past month. Will you share your thoughts on why investors need to diversify abroad?

TheStreet.com's Jim Cramer says this insurance company is a sign of lower costs, and it's not done yet.

How many ways can I explain that what's going on is massively deflationary? How about by pointing out one of the most sensitive stocks to deflation: Prudential (NYSE: PRU) (Cramer's Take). Take a look at the move this stock has had from its lows. It's almost a 50% move! That's remarkable. It is a sign that everything is worth less than it was a couple of months ago!

I have long used the price of conservative insurance companies -- and PRU is a conservative one -- as a gauge of inflation. Now, I know that Barron's had a positive article about PRU this weekend, but all you really got was a rehash of what an analyst has been saying. That's not behind the gain.

This company is a bulwark of deflation. Why anyone thinks that inflation is still a problem after looking at that chart is just nuts.

TheStreet.com's Jim Cramer says the oil stocks' decline yesterday was exacerbated by a hedge fund's collapse.

"I think the collapse in the commodity stocks shows a worldwide recession."

"The decline in oil and oil service stocks, far more severe than the decline in the commodity, bodes for $80 oil and gas."

"Without a hurricane hitting rigs, the companies involved in the servicing and maintaining rigs will have severe earnings declines, at least according to their stocks."

These are three perfectly acceptable analyses of the action in the Oil Services HOLDRs (AMEX: OIH) (Cramer's Take) and in the oils in general yesterday in light of Gustav's failure to do any real damage and a continued expectation that economies around the world are slowing.

It's just that they are false takeaways. The single most material issue for the stocks -- not the companies -- was the collapse of Ospraie Management, which blew up and got blown out and took a ton of stocks down with it. The fact that this market is thin, that lots of players clearly knew this blowup was coming, and that the fund was no doubt leveraged up the wazoo (as all desperate managers tend to be) exacerbated the declines perhaps two- or threefold.

The need for oil drilling services will continue even if the price of oil declines, according to Richard Lehmann. Here, in his The ETF Investor, he looks at a favorite way for investors to play this trend.

"Oil prices have a triple or quadruple price boost associated with them. The first is supply/demand dynamics, the second is the weak dollar, the third is speculative fervor and the fourth inflation fears.

"A pundit said that last year it took 65 Euros to buy a barrel of oil and today it still takes 65 Euros to buy a barrel of oil. This illustrates the effect the weak dollar is having on U.S. prices and the international price of oil.

"Inflation protection used to be the province of gold, but now it seems oil is serving a similar function. We think the current oil bubble has not run its course.

"One of our past recommendations, the Oil Service Holders Trust (NYSE: OIH), was first suggested in February 2006 at a price of $101.50. We recommended it again in December 2007 at a price of $179.83.

Solarfun Power (NASDAQ: SOLF) is scheduled to report Q1 EPS on May 21. SOLF over all option implied volatility of 75 is below its 26-week average of 94 according to Track Data, suggesting decreasing price risk.

Oil Services Holders (AMEX: OIH) volatility is low at 33 on $122 oil.

NASDAQ 100 (NASDAQ: QQQQ) overall implied volatility is at 24; the 26-week average is 28.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

The market bears are looking for cover and one of their leading superstars, Jim Melcher, who runs the Balestra Capital Partners hedge fund, told The New York Sun today that he believes we are heading for the worst recession since the 1930s and thinks the Dow will fall to between 9,100 and 10,400 - another 20% to 30%.

He told the Sun, "I've never seen the market with more risk and what's significant is that the risk is not yet priced in." He believes an investor's stock portfolio should be half what it is now. He expects unemployment to grow dramatically as consumption slows. And, he things the housing market collapse has a long way to go. He told the Sun that with the "burdens of rising energy and food costs, and combined deterioration of the credit markets" average homeowners will not be able to withstand this recession he sees.

So where's he putting his hedge fund's money? He says it's pretty much devoid of stocks except for two ETFs - the Oil Services Holders Trust (AMEX: OIH) and the StreetTRACKS Gold Trust ETF (NYSE: GLD). The rest of his fund management strategy is shorting stocks and certain bonds - mortgage-backed junk bonds. He's using derivatives, put options and credit default swaps. He is also short ABEX, which is an index of residential mortgage-backed securities.

Another key strategy he is employing is foreign currency trading. His favorite currencies are the Swiss franc and the Japanese yen.

Lita Epstein has written more than 20 books including the "Complete Idiot's Guide to Foreign Currency Trading" and "Trading for Dummies."

Today's important stories from TheStreet.com: Jim Cramer's Portfolios of the Week,
Cramer's 'Mad Money' Recap: Spotting Tops and Bottoms.

Worry about something else other than the chance that the Federal Reserve won't cut its short-term interest rate target. Worry about how little oil is out there to find, how we are running out of cheap natural gas and how China is the linchpin in oil usage, not us.

Those are some of the trepidations that I feel after reading the incredibly good speech by Schlumberger (NYSE: SLB) chief Andrew Gould earlier this month, available on the company's fantastic Web site.

Gould's dealing with the realities of why the Oil Service HOLDRs (AMEX: OIH) won't quit. Easy oil is indeed running out, despite what the bulls tell us. The new additions to old fields give out earlier. The kind of oil and natural gas that is still left to find in North America is low-quality and not deeply reserved. The places where oil can be found are all deepwater or remote.

On today's STOP TRADING! segment on CNBC, Cramer had several key stock picks: Cramer said he loved the Burger King Holdings, Inc. (NYSE: BKC) interview earlier on CNBC because it went from a bad company to a good company. He thinks it can go higher and it may be a multi-year story. On oil services, the Oil Service HOLDRs (AMEX: OIH) is breaking out and Halliburton Co. (NYSE: HAL) is on its way to $40. Cramer said he has a large gainer between here and Friday going into options expirations date: Deere & Co. (NYSE:DE) and The Boeing Co. (NYSE: BA).

I was a little surprised on Burger King because Cramer has not been one of its greater supporters and shares are up more than 100% from the 52-week lows. The Boeing call is actually impossible to argue with, at least today or until long-term projections change. This morning Boeing released its 20-year outlook with a total market opportunity being in the $2.8 trillion range. Halliburton may go there, it may not, but that has been a consistent call and was one of his top 2007 Value Picks for what seems like an eternity ($35.75 today, $29.72 at Jan. 3, 2007).
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With the S&P 500 nearing a new all-time high, technical expert Larry McMillan assesses the road ahead. Here's his technical view, a look at market leadership, and some favored stocks.

"A new all-time closing high for the S&P 500 suggests that the all-time intra-day highs at 1552 are now the next key level within the context of this market cycle. The positive technical pattern of higher-highs and higher lows has continued.

"Sector leadership remains positive as the financial sector – as seen in the iShares Dow Jones U.S. Broker-Dealers Index Fund (ASE: IAI) and the iShares Dow Jones U.S. Financial Index Fund (ASE: IYF).

"Also positive has been the continued strength in the energy sector as seen in the iShares Dow Jones U.S. Energy Sector Fund (ASE: IYE) and the iShares Dow Jones U.S. Oil Services Trust (ASE: OIH).

"Therefore, sector leadership remains positive – and this should continue to inspire further gains in the major market indices as long as this trend remains in effect. Meanwhile, market breadth has recovered over the past few trading sessions.

With record high gasoline prices and rising oil, it looks like nothing can stand in the way of Exxon Mobil (NYSE: XOM) lately. The stock has definitely been on fire, and once again today set a new all time high, trading up as high as $84.32 earlier in the session.

I know we are all tired of hearing about the current gasoline prices, but unfortunately there is no way around it... gasoline prices are hot! It was announced today that the national average for a gallon of gasoline rose to $3.196. Not a pretty picture for consumers, but for oil and gas investors things just couldn't get any better.

Gasoline isn't the only thing on the move, oil has been trading higher as well today. Oil is slowly but surely making its charge back up to the $70 level. Today the precious crude has jumped $0.90 to $66.88 and early today hit an intra day high of $67.10.

After yesterday's sharp rise in oil prices, we are seeing the market stepping back a bit today as this week's Energy Information Administration inventory report shows growing inventories.

As we discussed yesterday, the cold wintry weather which has finally taken hold across most of America had oil traders betting on a strong oil market over the upcoming weeks. We have seen oil make a nice bounce from its lows earlier this month when it was trading down around the $50 a barrel mark; yesterday we saw prices trading over $57 for a short period.

Today we get a little snap back into reality with an inventory report that shows oil inventories climbed 2.7 million barrels last week. Analyst's had been expecting to see about a 1.1 million barrel increase and this has put some pressure on the precious crude.

Currently oil has fallen $0.91 to $56.06 but all the major oil stocks are at this point doing alright so far in the today's trading. As of 10:55 this morning:

• ExxonMobil Corporation (NYSE: XOM) is trading up 0.2% to $74.52 up $0.13.
  
• Chevron Corporation (NYSE: CVX) is currently trading at 72.92 falling a slight 0.2% down $0.15.
  
• Valero Energy Corp. (NYSE: VLO) is trading at $54.05 gaining 0.4% or $0.21.
  
• BP p.l.s. ADR (NYSE: BP) is getting hit the hardest with the stock falling 0.9% to $63.04 down $0.55.
  
• Oil Service Holders Trust (NYSE: OIH) has put up the best day with a 1.1% rise to $136.89 up $1.51.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.