The best way to analyze a rally is to look at which stocks are powering it. My method is to watch the stocks most responsible for the gains in the S&P 500 because that shows the real drivers -- the real stocks behind the moves.
We are in fabulous shape today, and this is one gorgeous rally. Let's go over the top 10 stocks moving this S&P over the top. 1. Exxon Mobil ( XOM) has not participated in the upside of late as it has been held back by a perception that the oil rally off the $30s isn't for real. Now a combination of a weakened dollar, a shut-in of production and low gasoline prices spurring demand is making Exxon a huge part of the percentage gain. 2. JPMorgan Chase ( JPM) is the most important stock in the market because we need a bank strong enough to buy toxic assets and take advantage of the FDIC's desire to sell failed banks. I have said over and over again that we need to ring-fence some successful banks and allow them to thrive. During the height of the bank nationalization period -- a period we have finally obliterated -- this company's stock faltered, no doubt aided by a huge amount of naked shorting. It is really the key to the next 2,000 points of this rally and given the coordinated financial branch of the government plans, including the bank rescue plan, it is easy to see that JPMorgan could run many more points. 3. Two weeks ago, Wells Fargo ( WFC) was a bank that the market had decided was going to get nationalized because of its gigantic mortgage portfolio that seemed to be getting worse by the hour. But if California real estate is selling like hotcakes when it declines 50% and mortgage rates are very low -- and when housing is close to bottoming -- you are going to want to own Wells Fargo, not short it. Again, Wells Fargo has assets that could be sold and does best where the yield curve is right now. The Fed's moves and the mortgage modification plan will transform this back into a bank blue-chip fortress again. Existing home sales numbers that came out today cheer me up and should do the same for you if you own this stock as I do for Action Alerts PLUS .
4. Chevron ( CVX) is the cheapest energy stock with the possibility of a big dividend boost. I went over the recent presentation this weekend and this is the strongest public oil company, having now started to reap the benefits of all its drilling over the last four years. It is set to capitalize on any higher oil price and could go much higher.
5. There was a lot of controversy about this big Deep Dive last week with General Electric's ( GE) GE Capital: The only real takeaway was that the company doesn't need financing. If a company doesn't need financing and is levered to a worldwide recovery, why wouldn't it be an interesting speculation? It is basically undoing Friday's losses, which seems right. 6. Bank of America ( BAC), not Citigroup ( C), is the no. 1 call option on a turn in the economy. It has doubled in two weeks, but has been so forced down by naked short selling that it could double again if housing is coming back and we don't have severe mark-to-market. It is also the one that could suffer the most. We don't know how much of the Merrill Lynch "problem" is now behind BofA. If the company can hold its portfolio to maturity, it could have a 1991-like move off the bottom, like Citigroup, doubling and doubling again. It lacks the dilution of Citigroup, so it is a better play. Getting demonization off the front page would help here too, as these guys are public enemy no. 2 after AIG ( AIG) because of bonuses and we need that obscured by the economic plan.
7. AT&T ( T) is finally moving and it should. I like Verizon ( VZ) more because we are discovering the strength of FiOS and its sharetake, but AT&T is cheap. Not a financial, not an oil, but a utility that says, "Look out inflation buffs -- it isn't on the horizon," as otherwise this stock would not be rallying.
8. We can't rally without tech rallying, and while I have said tech has a better tone courtesy of Oracle ( ORCL), Qualcomm ( QCOM), Taiwan Semi ( TSM) and Xilinx ( XLNX) number bumps, we need Microsoft ( MSFT) to go higher. People should be buying Oracle, Microsoft and Salesforce.com ( CRM)as a software basket. This move is a very good sign that the tech rally is broadening. 9. What a move IBM ( IBM) has had. Remember it had a great quarter and is also a huge weak dollar play that is not expensive and has a lot of short sellers at this level. I am amazed that this one can go higher despite the potential acquisition of Sun Microsystems ( JAVA). But then again, the company has momentum and it is able to break out simply because it should have a great second half if the dollar keeps up like this. 10.. Normally I would be worried about Procter & Gamble ( PG) if we were going into an economic turn. It should be selling off if we are seeing things are better in the economy. I am not concerned this time because of two reasons: it has been a play on a weak dollar and they have killed it because of that; and it has been a real trade down killer -- people don't want to pay up for P&G's brands. Any strength in the developing world means a return to P&G use. It is also a sign that the commodity costs, hedged going into the quarter, are going to come off going out. Very easy second half ahead. This is a broad-based rally that matters, even if it is off a snapback rally off of Friday. I know that everyone is keying off the SPX 800 level. If we are going to breach it, we are going to do it with these 10 and their ilk. I think we can. At the time of publication, Cramer was long JPMorgan Chase, Chevron, General Electric, Qualcomm and Wells Fargo.