A Rally Based on Oversold Negativity

Bizarre confluence of strength and weakness today. Obviously, the Ambac (ABK - commentary - Cramer's Take) non-bailout bailout is going to send every company that needs insurance down.

Did anyone really think that ABK would get money? You can get a recession right off the collapse of insurance alone unless we get something like I talked about earlier, from a Pimco or a Blackstone or, of course, the Fed -- least of all likelies.

But, against that, we have oil and oil service ramping as well as gold and minerals. That means the antirecession thesis is in play.

You can't get a rally in copper if you are about to go into a bank-led recession.

We also, though, have strong action in Altria (MO - commentary - Cramer's Take) and Pepsi (PEP - commentary - Cramer's Take), Coke (KO - commentary - Cramer's Take) and Procter (PG - commentary - Cramer's Take). That's the recession thesis writ large and jives with the collapse of the financials.

We have health care cost containment going higher after a big pushdown -- witness the rally in Medco and the continued rally in bad boy UnitedHealth (UMH - commentary - Cramer's Take), that's recession.

But the drug stocks are just awful, and that cuts right into the recession play. Totally bipolar, although biotech is strong, and that can be the recession cue and the drug stocks could be just bad earnings.

Retail is split -- high multiple retail taking it on the chin (Costco (COST - commentary - Cramer's Take) and Deckers (DECK - commentary - Cramer's Take)), despite decent numbers. Tech's not nearly as strong as I think it should be, but it borrowed its rally yesterday.

Ag's on fire, of course, as the shorts went to work huge on them yesterday. But this group can reverse on a dime if only because the shorts want and need it lower, it is that much of a leadership group.

It's too mixed a bag for me. I still believe in this overly negative rally. We are oversold, but not as oversold as I like, and we have fewer bears than I expected, but the shorting remains torrid.

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