Rising Oil Could Burn Down Rally Hopes

We are now at the upper limits of what I think most companies can tolerate when it comes to crude. This $63 price is now double where we were when the consumer stocks bottomed, and it must cool soon, or we can kiss a fantastic retail/restaurant rally goodbye.

The whole run off of the bottom for everything from Darden (DRI - commentary - Trade Now) and Brinker (EAT - commentary - Trade Now) to Nordstrom (JWN - commentary - Trade Now) and Kohl's (KSS - commentary - Trade Now) came about because of the collapse of gasoline prices.

At a certain point it will dawn on the people who keep bidding up these stocks that the next month simply won't be as good as the previous ones because of gasoline creeping near $3. I had thought it wouldn't occur, because one of the reasons gasoline has run is because of refinery changes. But we are past that. Now it is simply the relentless trade up in crude.

Of course, the stocks that lead the price of crude, Exxon Mobil (XOM - commentary - Trade Now), Chevron (CVX - commentary - Trade Now) and Occidental (OXY - commentary - Trade Now), are signaling the peak, although the drillers like Schlumberger (SLB - commentary - Trade Now) and National Oilwell Varco (NOV - commentary - Trade Now) are signaling otherwise.

I know, though, that if crude goes through $65, my upper reaches of where we might still be OK, then I have to be far more worried than I am now about this market, and I, again, note the resilience of this tape -- when taking yesterday into account -- as it still believes that higher energy costs are somehow good for the market.

At the time of publication, Cramer was long CVX.

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