Oil is lower, so why is market fearful?
The threat of $4 gas and its impact on the economy are far more worrisome than a pullback in commodities.
As someone whose biggest fear is $4-a-gallon gas and what it will do to the U.S. economy, I find days that start out like this -- with oil almost back to $85 and stocks floundering -- deeply troubling. You remove my principal worry of $110-a-barrel oil, where we are knee-deep in the $4-plus gas range, and I think the market should be quelled of fear, not fearful.
Of course, it is just the opposite. It is the bursting of the commodity bubble, which signals that economies are cooling off. It is a sign that China has gotten too soft, that things aren't as good as we think.
And it means that the industrials have to sell off with no place to rotate that money into, because the other commodities aren't coming down as hard as oil. Without those coming down, many of the food and beverage stocks we would rotate into don't work. Plus, the drug stocks are just awful.
Of course, on Monday we were able to mount a rally, including many of the oil stocks, when the oil futures were down. But today the S&P 500 ($INX) is heavy enough that we will see the oils pulled down with them.
It's always a fine line between a pullback in some commodities and a feeling that a commodity pullback means the end of earnings growth because of worldwide cooling from rate hikes. This is especially true when people are starting to talk about rate hikes here -- something that I think would be inconceivable until we have job growth.
It seems nobody wants to come out and say, "OK, it looks like we have commodities under control, so without that big tax on the consumer, the expansion will continue in fits and starts but continue without pressure from the gas pump."
But I think that's what is really going to happen. It just won't happen today.
I think we could have the best of both worlds: one, short-term boost to many of the commodity and commodity-related names we follow, from PPG (PPG) to Owens Corning (OC) to Weyerhaeuser (WY) and Vulcan Materials (VMC), courtesy of the Australian rebuild, one that I think will be as big as Katrina, and two, a stabilization of oil at a level that is neither here nor there, one that neutralizes the issue as a big worry.
However, on a day like today, with futures down badly, that hardly seems to be the case. I just reiterate that it is hard to be as bearish as I was when oil was at $95 going to $110.
But I seem to be very much in the minority with that viewpoint.
At the time of publication, Cramer was long Weyerhaeuser.
Follow Cramer's trades for his Charitable Trust.
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