If Bernanke Manages to Stabilize Things, These Sectors Will Rally

Excerpt from Raymond James strategist Jeffrey Saut's latest essay, published Monday (March 2nd):

In past missives we have posed the question, “What if, by flooding the system with money, creating negative real interest rates, reintermediation, and stabilizing the financial meltdown, Ben Bernanke is closer to fixing the economy than anyone currently thinks?” If so, what should precede a stock market rally would be a rally in corporate bonds, a rally in copper, a rally in TIPs (Treasury Inflation-Protected Securities), and a general rally in all reflation “plays” as the current pricing of extraordinary levels of deflation into stocks/Treasury Bonds fades. And, that is what has started to happen with copper rallying 7.9% last week, crude oil better by 15%, and unleaded gasoline surging 18.6%.

Energy is particularly interesting to us since we have maintained the belief that crude oil bottomed back in January in the low $30s. Current energy-centric names on the Analyst Current Favorites list include: Consol Energy (CNX); Continental Resources (CLR); Inergy (NRGY); and Transocean (RIG).

The call for this week:

...[W]e suggested last Tuesday that if the markets could get a “pornographic plunge” type of hour, with a concurrent “look” below 7000 on the DJIA, it might be sufficient to lock in a tradable low provided we are not in crash mode. Regrettably, we never got that “I think I am going to be sick” type of hour. So we begin this week with the same strategy. And as of Monday morning the preopening futures are down hard again on negative comments from Warren Buffett, another AIG Gotcha (AIG), and more HSBC horrors (HBC). Meanwhile, there is a TD Sequential Buy Setup (aka, Tom DeMark) on a daily, weekly, and now monthly basis, which is interesting because the DeMark indicator measures ”trend exhaustion.” Consequently, we are attempting to focus on what could go right for the equity markets and the economy.

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Comments

[viva:]

Primera, Tejas! Viva la revolucion!

Mar 03 09:20 AM

[silverwood:]

Jeff, viewing your long term SP500 chart, it appears to be a classical double top formation. Support has been broken. As I write this SP500 trading at about 695. So technically it is looking like we are going a lot lower. So the question to be asked can Bernanke's intervention in "free" market stop the carnage?

Mar 03 01:54 PM