Confused Market Looks to Terrible Leaders

The market's confused here. It doesn't know whether inflation or deflation is the problem (deflation in housing, that is, which is quite precipitous). Unlike Ben Bernanke and his minions, people don't know whether the economy is strong or weak.

You get a GM (GM - commentary - Cramer's Take) upgrade and you think, "It must be strong," but then again, maybe it is just GM finally getting a handle on its cost structure.

Darden (DRI - commentary - Cramer's Take) and Best Buy (BBY - commentary - Cramer's Take) signal particular weakness.

The housing numbers are disastrous and while I remain alone in believing that the actual subprime fallout will soon be behind us, I am also adamant that one of these major homebuilders will be forced out of the game by the end of this round because they simply should not be putting up any homes. They can't, of course, because that's what they do. But they need to shutter production to get their supply in balance. Some of their insistence on building has to do with infrastructure costs laid out ahead of time forcing their hand, but some of it is innate and wrongheaded optimism.

So, the market likes to take its cue from where the strength might really be and, bizarrely, in all the confusion it takes the leadership from oil and the oil and gas segment.

That's a terrible form of leadership, in that oil and gas is a tax on the system. So when it goes down -- and the stocks go down -- we should rejoice. Nevertheless, we instead noodle about the notion that perhaps the economy is too weak to support higher prices for the group and that the only reason they are up here is because of terrorism.

So when the complex goes down, it can take everything with it.

Perhaps from my faraway perch (I'm ostensibly vacationing outside the country) it is clear that the market wants to go lower and that this complex is signaling such. It's a great time to pick away at favorites, but only if you do a little trimming, as I have done in this very sector for Action Alerts PLUS. It ran too much. That's all I think really happened.

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