American consumer confidence at the lowest level in 16 years... house prices falling in May the most on record... Looks like those government tax rebate checks didn't help much at all.

I'm a big believer in the stock market being a leading indicator. And the stock market had discounted many economic events before oil prices started to rise.

The Conference Board's lowest reading of U.S. consumer confidence since 1992, the S&P/Case-Shiller recent announcement of a 15% drop in home prices in 20 popular American cities, and the credit crisis are things the market had expected. After all, the economic tidal waves that follow one of the biggest property busts in American history cannot go economically unnoticed.

Despite these events, the stock market was moving merrily along its way since its January 2008 lows until oil prices started to move aggressively higher. I believe that higher oil prices are something the stock market did not anticipate, especially to the degree they have risen. In fact, up until $125.00 per barrel, the stock market was not even that concerned with higher crude prices.

But when you have companies like FedEx, United Parcel Service, Best Buy, Ford and all the airlines coming out and saying that they are going to report softer earnings, as higher oil prices are squeezing consumer demand and profit margins, the stock market does take note.

So, since the middle of May, when oil prices started to rise to over $125.00 a barrel, the Dow Jones Industrial Average has been moving lower. The world's most widely followed stock index is down about 10% since mid-May, coincidently matching the 10% rise in oil prices during the same period. It's amazing how a single commodity can move the price of such a largely capitalized stock market index.

Right now, the stock market is obsessed with the price movement of crude oil. Check the market any day. If oil prices fall, the stock market is up for the day. If oil prices rise, the stock market is down for the day. A move for oil back to $125.00 a barrel could see the stock market rally 10% higher. And that's something I won't be surprised to see.