False Linkage to Oil Is a Big Anchor

Once again today we see the problem with a commodity-driven market -- it simply can't be trusted. If oil has been manipulated up by traders and is now beginning to respond to the desultory fundamentals, then the complex is too high and the rallies, whether they be in Conoco (COP - commentary - Trade Now) or Occidental Pete (OXY - commentary - Trade Now) (as examples), can't be trusted. (I am conscious of the Howard Simons issue of actual leverage to oil, but the real issue is that these are levered to ETFs that are viewed, rightly or wrongly, as proxies for oil.)

The further impact and carryover to the oil drillers is again a major impact situation. To me, given the still-inflated price of oil -- I am using a $45-$50 target -- the Oil Services HOLDR (OIH - commentary - Trade Now) should be sold every time we get a rally.

And as Don Dion has written endlessly, the U.S. Natural Gas Fund (UNG - commentary - Trade Now) has propped up prices in natural gas. Natural gas stocks can only be bought gingerly and if there is a "story" associated to them -- hence why we are buying Devon (DVN - commentary - Trade Now) for Action Alerts PLUS, because of new production coming on-stream.

As we have not broken the phony linkage between oil and the economy, I think we are setting ourselves up for endless disappointments every time oil goes up until it gets to my price target. Which means that today is a good day to sell this group.

At the time of publication, Cramer was long Devon.

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