Fed Defense: Play the Old Favorites

If you made money yesterday, you've been losing money all year. That's pretty much the definition of what worked yesterday: anything that had been generating a loss this year.

Of course, the Dow mocked people again. In many ways yesterday was a severe disappointment for a lot of people who were positioned correctly for much of 2006.

Can this new countertrend continue? The answer is, frankly: Only if the Fed pulls a 2000 on us. You simply must have a recession to make yesterday's market be the new market. It is all Budweiser (BUD - commentary - Cramer's Take) and Schering-Plough (SGP - commentary - Cramer's Take) and Pepsi (PEP - commentary - Cramer's Take), precisely the stuff that led 2001 when the Fed crushed us.

To me, that's not possible. There are signs of strength and weakness in this economy. Housing's weak and getting weaker. Target (TGT - commentary - Cramer's Take) showed pronounced weakness. BestBuy's (BBY - commentary - Cramer's Take) going down. I keep thinking about that interview with the Microchip (MCHP - commentary - Cramer's Take) CEO on Friday, the one where he dodged the question about how big screen TVs -- he makes some of the most important parts -- are faring.

Now we have the crash in commodities. People think that oil's next (at least the oil stocks trade that way), in part because they are extrapolating natural gas, which seems in great abundance.

Against that, however, are signs that infrastructure, aerospace and commercial real estate are red hot. I have George David and Ray Milchovich from United Tech (UTX - commentary - Cramer's Take) and Foster Wheeler (FWLT - commentary - Cramer's Take) on "Mad Money" tonight to grill them both about these markets. To me that's a balance the Fed shouldn't tip. You put one more of these winners in the loss column and you will downshift the economy harder than you would like.

So, I would begin returning to the old favorites today. I would start with the tech that held yesterday that had good quarters. I would then go to the metals that are less overstretched: aluminums. And I would pick at the high-quality oil and oil service names with minimum exposure to natural gas.

I wouldn't sell the SGP's yet -- they get their three-day rotations. But I would get ready to cut those back and add to the cyclical names that were sold because of a strong dollar and because of fears of a recession or prices that are unsustainable.

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At the time of publication, Cramer was long Foster Wheeler and Schering-Plough.

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