Stocks for a China-Driven Market

 | Mar 23, 2012 | 3:36 PM EDT
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China on! That's what's happening today with the oils and minerals flying, and while many are saying that oil is up because of Iranian supply cuts, I think it's because of scuttlebutt that the Chinese are cutting rates as early as this Sunday.

Last night I talked about how this market has got a real volleyball theme going with rotations happening very rapidly day to day. So we caught two down days of oil as the group rotated out of the server position and took to the net. Now the oils are serving, as they have time and again after a couple of down days. I think we are going to stay in this rotation mode, because every time the group gets hammered for a couple of days, we are going to catch a rumor of Chinese rate cuts, and the shorts will cover, and the longs will flock to the quickly beaten-down group.

Do I think we will get a rate cut?

I know after that Purchasing Managers Index report showed a further contraction that there's lots of chatter than China may grow only at 7%, not 8%, which is down from 12%. I would put it like this: I think it is just a matter of time before rate cuts happen, and time may include Sunday night.

This best bargains in the stock market right now may very well be the oil and gas companies that are becoming more oily by drilling in the Permian, the Bakken, the Eagleford and the Niobrara. That means buying EOG Resources (EOG), Carrizo Oil & Gas (CRZO) and Devon Energy (DVN), to name three that are making the transformation. I also like Linn Energy (LINE), a 7% yielder that's well hedged and has terrific properties all over the country.

As odd as it is, those independents have become the best way to play "China on," and if China's off, you still could make money. It's a little ridiculous, but it has worked every time since this good year began!


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