Cramer's Mad Money - 6 Reasons the S&P 500 Will Reach 1200 (9/8/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday September 8.

In spite of doomsayers, Cramer thinks the S&P 500 is headed for 1200. Technician Dan Fitzpatrick has pointed out a bullish double head and shoulders pattern, and thinks the S&P could even see a 24% increase at 1272. Cramer discussed six fundamental reasons to show why the chart is telling the truth:

1. Takeovers: Usually, a week before Labor Day is slow for the market, but last week, there were four major takeovers or bids for takeovers. If stocks were overpriced and poised for a decline, there wouldn't be so many deals on the table.

2. Money is flowing. Many investors who were on the sidelines for a while are jumping back into the market. The renewed activity will mean strong year-over-year numbers.

3. Leadership is Broadening. While banks, oils and tech stocks were in the lead last spring, healthcare and transports are on the move, and the news of economic activity in general is good; "This kind of broad-based leadership is a huge positive," says Cramer.

4. Housing bottomed. Cramer says his prediction of a June 30th housing bottom indeed came true and pointed to a decline of sales in summer and the beginning of a reversal. The damage has been contained, or at least, cannot get any worse, according to Cramer .

5. Firings have stopped. While many companies streamlined their staff as a way of cutting costs, Cramer thinks this trend is finished. While it is uncertain when companies can afford to start hiring again, Cramer thinks they probably have stopped letting people go, and unemployment will not be plaguing the market for much longer.

6. Retail is stronger than expected. While critics were decrying back-to-school sales, they were not as weak as the media presented them. Cramer thinks diverse retail stocks such as Tiffany (NYSE:TIF), Kohl's (NYSE:KSS), Gap (NYSE:GPS), Coach (NYSE:COH), Williams and Sonoma (NYSE:WSM), Jones Apparel (NYSE:JNY) and Aeropostale (NYSE:ARO) are undervalued, given the attitude toward retail.

Mad Mail: Comcast (NASDAQ:CMCSA), Time Warner (NYSE:TWX)

A viewer asked Cramer what he thinks of a new service put out by Time Warner and Comcast that allows subscribers to see television shows over the internet. "Nothing at Time Warner or Comcast can be run by clowns," said Cramer, but he added that the FCC rules need to change to allow companies to expand their ownership. The possibilities look good, but there might not be an immediate effect.

The ABCs of Options: CEO David Fisher, OptionsExpress (NASDAQ:OXPS)

While Cramer has avoided discussing options on Mad Money because of the complexity of the subject, options trading is quickly becoming a more popular way of investing. The number of active, private investors buying options has increased 7% over the past year and is expected to continue to grow.

David Fisher said merely a decade ago, options were considered to be only for Wall Street insiders, but nowadays, anyone can trade options, since they are a solid protection even in difficult markets. The average options investor is older, around 50, and is not out for a gamble, but wants real returns on investments. Fisher says 60% of his business is in options, 20% in futures and 20% in stocks, but with only 10% of options traders using optionsXpress, his company can reach many more investors, particularly those who are new to options trading and need expert advice.

XTO Energy (XTO) CEO Bob Simpson

Natural gas could be the solution to the country's environmental and energy problems. If natural gas were used instead of coal or oil, emissions would be reduced by 50%, and while wind and solar are cleaner than natural gas, it will take decades for these technologies to advance enough to compete with less-clean energy resources. What is stopping natural gas, which is a plentiful, efficient transition fuel? Coal is the enemy number one of natural gas, and spends four times as much money lobbying Congress. Coal has friends in high places: railroads, which get paid generously for hauling coal, and utilities, which are 59% fueled by coal.

The fact that natural gas is still profitable, even at record lows is a good sign. Bob Simpson said the company was smart and pre-sold its production for the year back when prices were much higher. Even with natural gas at $3, XTO has pre-sold 40% of next year's output at $9. Simpson thinks Washington will finally see the light with more information on the benefits of natural gas. He also thinks the price of the fuel will recover as the supply continues to shrink.


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