The rain in Spain helps oil go down the drain. Last week a downgrade in Spain's credit rating helped sink oil. Overnight it was a report on Chinese manufacturing that did the deed.

Last Friday, ahead of the holiday, Fitch downgraded Spain's credit causing stocks and oil to tumble. That was only temporary because at the end of the day we all know that Europe doesn't matter, it is all about China and China has decoupled from the rest of the globe. Well, not so fast. Overnight the China Federation of Logistics and Purchasing reported that China's Purchasing Managers Index fell to 53.9 in May from 55.7 in April. That dip in Chinese manufacturing seems to suggest that perhaps China is getting impacted by the economic turmoil in Europe. China exporters count on Europe to buy their goods but it is possible that because of the turmoil it's happening at a slower pace.

Adding to the cracks in China's unbreakable reputation is concerns rising surrounding their housing market. The Financial Times reports, The problems in China's housing market are more severe that those in the US before the financial crisis because they combine a potential bubble with the risk of social discontent, according to Li Daokui, a professor and an adviser to the Chinese central bank. The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis, said Li Daokui, a member of the bank's monetary policy committee. It is more than (just) a bubble problem. Rising property prices were a potential flash point among younger people locked out of the market.

At the same time China has lowered fuel prices. Dow Jones reports, China will lower domestic fuel prices because of falling crude prices, a move that may relieve some concerns Beijing will be unable to keep consumer-price inflation to its target of 3% or less this year. The National Development and Reform Commission said Monday that China will cut gasoline prices by 230 yuan ($33.69) a metric ton and diesel prices by 220 yuan a ton effective Tuesday, after sovereign-debt woes in Greece and potential problems in several other European Union countries sent crude prices plunging. The changes represent cuts of around 2.8% and 2.9% below current average gasoline and diesel retail ceiling benchmarks of 8,220 yuan and 7,480 yuan a ton, according to Dow Jones Newswires calculations. Lower oil product prices could take some heat off the inflationary pressures Beijing is facing from higher food prices, Qiu Xiaofeng, an analyst with China Merchants Securities, said recently. Yao Jingyuan, chief economist of China's National Bureau of Statistics, warned Friday that the consumer-price index target can be achieved, but with difficulty. The CPI, China's key inflation gauge, rose 2.8% from a year earlier in April and is likely to rise around 2.5% in the first half of this year. If you see high inflation and slower exports could that be the start of major problems in China? Bloomberg News reports that oil and natural-gas rigs operating in the U.S. rose to the highest level since January 2009, as the number of oil rigs jumped the most in six months, according to data published by Baker Hughes Inc. The combined oil and gas rig count gained 17, or 1.1 percent, to 1,535. The figure rose to a 22-year high in 2008, peaking at 2,031. U.S. oil rigs gained 17, or 3.2 percent, to 555, the one-week climb since the week ended Nov. 13. The oil rig count was the highest since February 1991.

We see some potentially great opportunities ahead. My long term outlook is still very bearish. The best way to trade it may be the ranges. Call for the latest numbers at 800-935-6487 or email me at plynn@pfgbest.com. See me every day on the Fox Business Network!