The market is as oversold as it has been at any time in the last 10 years. Although a bounce is likely and one of significant magnitude at that, the start of any Earnings Season is usually cautious, if not downright negative. So, investors battered by surging energy prices, disappointing economic data and the ongoing credit crisis will have something else to worry about, starting this week - second-quarter corporate results.

The season initiates with Alcoa reporting tomorrow and General Electric rounding out the week with its report before the open on Friday. This pair of Dow components could give the Street a good idea of what to expect when hundreds of others report later in the month. Investors, already concerned that companies can't even beat the current low-ball expectations, will be even more focused than usual on the forecasts for the second half of the year that accompany these earnings reports.

One thing is for sure, although this market will almost certainly rally one of these days, there can be nothing sustained until the price of oil retreats. It is important to note though that even then, any positive outcome would assume that the economy still retains some zip. In any case, crude oil for August delivery rose to a record $145.85 a barrel on the New York Mercantile Exchange Thursday. OPEC President Chakib Khelil reiterated that record oil prices are not related to supply. He opined "Prices have surged mostly because the US Federal Reserve lowered interest rates to boost the American economy, which weakened the dollar.'' In other words, oil has become a safe haven against the ever declining value of our dollar.

Then again, amidst the seemingly endless debate over the "real" cause of crude's ascent, some savants offer yet another explanation, the GSCI Index and how buy-and-hold institutions handle it as part of portfolio insurance. This index, which S&P acquired from Goldman Sachs in early 2007, is used by many institutional investors and pension funds, as a benchmark for commodities. Estimates are that $100 billion to $110 billion is currently benchmarked to the index, up from $80-$85 billion at the end of 2007. At 78.1%, it is heavily weighted in energy and more than half of that is in NYMEX crude.

Increased pension money going into commodities is therefore inadvertently driving energy prices higher by driving up its weighting in the index and prompting even more buying by index funds. In effect this action is reminiscent of the program insurance in index futures that overwhelmed the stock market and caused the crash of 1987. Technically, the funds are buying swap contracts that mimic the index versus the index itself, but the point is that the index is overweighed in energy and rebalancing it would go a long way in bringing crude prices down. There is historical precedence for this viewpoint, since prices declined after the energy weightings were reduced in 2006 and 2007.

Returning to the outcome of any break in the oil commodity bubble, other commodities might offer some guidance. The energy related coal and materials sectors had enjoyed huge price gains this year, but in possibly a major development for the energy picture, these stocks got absolutely hammered last week. The materials sector fell 5.8% as a rate hike by the European Central Bank, worrisome economic data out of the U.K. and Japan and general concerns about a slowdown in the global economy triggered an aggressive bout of profit taking. It finally appears that slower global economic growth might finally be capping off the seemingly unending rise in everything from coal to oil to steel. The Financial Times calls coal the canary in the mine for the stock market.

A pullback in commodities after a truly astounding bull-run isn't unexpected, but the broader question is, if commodity and energy stocks start to crack, can other sectors rise up to replace them? We can't be sure, but it is highly unlikely, at least right away. As those shares charged ever upward on a record-setting bull run, they've sapped strength from almost all other corners of the market and trends don't reverse immediately. So, it's worth remembering that even though $140-a-barrel oil is painful, a real pullback in commodity prices is also usually a sign that the economy, both globally and here, is slowing and that's clearly a negative.

The bottom line might be - sometimes, you can hardly win for trying.

The markets only traded three and a half days last week, but there were some important economic reports. For example, the Chicago Business Barometer, also known as the Chicago PMI, improved slightly to 49.6 in June, from 49.1 in May. However, readings below 50 indicate economic contraction and it was the fifth month in a row that the barometer posted a sub-50 reading. The PMI continues to reveal a "thinly contracting economy," ISM-Chicago said in an accompanying news release.

In related news, Factory Orders turned in their weakest performance in three months in May, reflecting slumping demand for autos, heavy machinery and steel. They rose by 0.6% in May, less than half the gains turned in during April and March. It was the poorest showing since Factory Orders fell by 0.4% in February.

Employment data was considered the key report of the week. It revealed that the US non-farm sector lost 62,000 jobs in June compared to expectations for a decline of 60,000 jobs. The economy has been losing jobs even since the beginning of the year, triggering concerns over the health of the labor market, even as the economy grapples with slowing growth. The unemployment rate based on the household survey held steady at 5.5%. Meanwhile, the average hourly earnings increased $0.06 or 0.3% to $18.01.

The Economic Calendar starts tomorrow, with the latest numbers on Pending Home Sales and the Consumer Credit report. On Wednesday, we'll hear the usual Crude Inventories report. On Thursday, we receive numbers on the latest week's Initial Jobless Claims. Lastly, on Friday, we'll see the preliminary University of Michigan Consumer Sentiment Index and the Trade Deficit numbers.

As we indicated this week kicks off a new Earnings Season, with the likes of Alcoa and Pepsi Bottling reporting tomorrow. On Wednesday, Ruby Tuesday's and the Shaw Group report. On Thursday, we will see reports from Texas Industries and the Marriot International. Finally on Friday, General Electric will be heard from.

Tomorrow, Fed Chairman Bernanke speaks at a FDIC Forum on Mortgage Lending before the market opening and Richmond Fed President Lacker speaks on the economic outlook at noon. Thursday, Fed Chairman Bernanke and Treasury Secretary Paulson testify at the House Financial Services Committee on financial market regulation at 10:00am. San Francisco Fed President Yellen speaks later at a Community Leaders luncheon.