Another Leg Down in Oil Would be Great for Equities

I got my wish on Friday when oil closed down on the day and Merrill (MER - commentary - Cramer's Take) finished a bit higher -- despite a horrible earnings report. When stocks don't go down on bad news it's usually a good sign.

I believe oil is beginning its correction and it will head towards $100. I would look to be a buyer of oil and natural gas stocks before too long if events unfold as I hope. (We had cut our positions in half some time ago).

But the declining price of oil is a tonic for the market. It will be interesting to see oil's action Monday, as it appears that the high level meeting with the Iranians did not produce much if anything at all in settling that situation.

If oil does move down and the bloom goes off the commodity trade (all commodities as corn closed Friday at $6.09 a bushel down from a recent $7.65), the overall stock market may well be the beneficiary of the money flow.

We are in a bear market and the average decline in a bear market is 30% from the top. We are a good bit of the way there and we should start to sort out those groups that have been in their own bear market for some time.

Financials fit the bill, and this week brings earnings from a bunch more financial companies including Bank of America (BAC - commentary - Cramer's Take)on Monday and Wachovia (WB - commentary - Cramer's Take) on Tuesday.

Wachovia might be the more intriguing name, as there is a new CEO, and this would be a good time for him to clean the decks and write-off everything possible. He can blame it on the last guy. If the bank needs capital, it will be really interesting to see where it comes from, and on what terms.

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Vincent Farrell Jr. is a principal of Scotsman Capital Management. Prior to joining Scotsman in April 2005, Farrell was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships. He is a regular guest on CNBC as well as other national print and broadcast media.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.