Opening Segment 1 Title: 'Cramer's Game Plan   For Next Week' .  .  .  .  . Featured Stock(s): Wells Fargo (WFC) JPMorgan (JPM) Lehman Brothers (LEH) Research In Motion (RIMM) Salesforce.com (CRM) Hewlett-Packard (HPQ) Google (GOOG) IBM (IBM) Ingersoll-Rand (IR) Emerson Electric (EMR) Eaton Corp. (ETN) Parker Hannifin (PH) L-3 Communications Holdings Inc. (LLL) Owens Corning (OC) Toll Brothers (TOL) Costco (COST) Wal-Mart (WMT*) Jones Apparel (JNY) VF Corp. (VFC) See Opening Segment 2, below...

After this segment, you can see Jim's Lightning Round picks here...

        
JJC:    Let's start with next week's game plan...

After a huge up day today, I think we have to address it head on. Now, one way to address it head on is to look at stock charts... Now, I don't believe in following the stock charts, okay... What's known in official Wall Street jibberish as "technical analysis".... I don't buy into most technical jargon, or subscribe to the idea that a stock - because it's gone through some line is about to go like that - or that a stock, because it's going through this line is about to go like that... I don't subscribe to the theory of the "head and shoulders," where, if the stock gets here, it starts going down...whatever.

I just you know...the charts?...  That's what they indicate stocks should do, okay?... Which is why, even though I have de-bunked this just now and threw out these three and a half years of Mad Money...it's funny that the Game Plan for next week is all about a tool of technical analysis...that's right...

We're going to use a tool of technical analysis to explain what happened today a little bit, but more important, how you can make money next week...and it's known as the Standard & Poors' proprietary oscillator.  I actually do subscribe to a service from the Standard & Poors, where I get charts hand-delivered to my door every weekend... simply because I actually like to look at the pictures... the pictures of how a stock's doing... in order to generate ideas for the show and for my charitable trust that I run...I'm constantly trying to generate ideas for that.

Now, I don't put much weight on the notion of the "head and shoulders," okay... that's the chart that's negative...or the "cup and handle," which is another one... This stuff might as well be astrology, entrails to me...okay, as far as I'm concerned. The idea that a stock is a sale because the charts are terrible... meaning that the direction of the stock has been down, so it'll stay down until it reaches what is called support...a level where it held before...no.

I think it's garbage...

I've always felt that stocks tracked companies...and if the company's fortunes are turning up or, if the stock of a good company has been taken down so low that it's cheap, I don't want to be talked out of buying it, because it looks like this, this, this, this, this...  No...no.  If a company is doing well on the stock...because that might be a damaged stock, but not damaged goods. But there is one part of technical analysis that I have followed religiously since 1987... and that's the aforementioned S&P Oscillator... [See the S&P link for this here>>].  The oscillator is a measure of how much selling or buying pressure there is in the market.  Again, I know that's a difficult concept...bear with me. When stocks are equilibrium...meaning they're probably not going to go up or down that much...the buying and selling...really roughly about the same at that moment, the oscillator is around zero, okay?

Alright here's the deal...

Most of the time, the oscillator's... there's no real edge of the line when its at zero, that's the axis... but, when there's buying for multiple days...you come in Monday, Tuesday, Wednesday, Thursday, Friday, and each day it goes up, because there's more buying than selling, that moves stocks up dramatically, the oscillator flashes and tells us that we are over bought...meaning stocks are out of equilibrium, and there's too much movement in that direction...

Over the last three years, when we hit +5... it's got an axis... When we hit +5 on the oscillator, that has always indicated that it's a good opportunity to ring the register... to take some money off the table.  And that has always been the case...I said in the last three years always...since 1986, with very minor exceptions, when we hit +5, you got a go, okay?  And I have found the indicator to be incredibly reliable, even though it is technical.

Now the same is true the other way... When there is selling multiple days and again, the axis is one to five...it actually goes down to ten, but five is what matters here...when there's selling for multiple days that moves stocks down dramatically, taking us to -5 on the oscillator, the opposite, the mirror image of +5... that's a flash of green... you simply have to close your eyes and buy, because we are so oversold...  You have to buy even if you think the world is coming to an end...  you have to buy even if everyone is saying, listen it's over, except it isn't over... And, while I know that past performance is not indicative of the future, I have to believe that the sun will come out on Monday, maybe even Tuesday.

Here's how the oscillator ties into our game plan for the week...

As of this morning, we hit -6.  That's even below... that's like the danger zone...  If you don't cover your shorts, and you don't start buying, you're going get hurt.  There's been no time in the last three years, not once, that we didn't have a huge rally after this oscillator had fallen to these levels.

Very simply, I believe that it's time to buy, buy, buy...

But buy what?...

For a trade into an oversold condition, which is what we're doing right now...I like to buy the most heavily beaten down sectors...stocks like Wells Fargo (WFC), on the banking side...where there is dramatic insider buying... Or JPMorgan (JPM), which has fallen a lot since it's done it's Bear Stearns (BSC) deal... or virtually any of the brokers still left standing... excluding Lehman Brothers (LEH), because I don't like to buy when a CFO heads out...as anyone who watches the show for a long time...even one as over matched as Aaron Cowling (?)... It was always "In Fuld We Trust"...Fuld being the CEO...  not "In Cowling We Trust"...until this year... Now, in LEH, it's no one we trust...alright?... But, what you saw today, just so you know...when we hit -6, that's why we hit the big rally today...it was technical...technically derived...  nothing good happened but we saw we were up 166 because we hit this level, alright.

Tech...I don't like tech...but I'll go with some new horsemen of tech...Research In Motion (RIMM), Salesforce.com (CRM), Hewlett-Packard (HPQ)... I like the merger... Google (GOOG) and IBM (IBM)... they are going to bounce off this.

How about "new tech?"... which I actually do like...

We saw the makings of a rally in that today. Ingersoll-Rand (IR), Emerson Electric (EMR), Eaton Corp. (ETN), Parker Hannifin (PH)... up two... I don't care. 

How about defense?.... They're all down because of fears that Obama will go Gandhi on us... Nothing could be further from the truth...I think Obama is on board...I think you have to buy defense stocks that have been hammered...particularly L-3 Communications Holdings Inc. (LLL)... because they do a lot of homeland security.

I'll even tell you to take a stab at, yes, hold your nose...  but remember that's what you do when you're down here in the oscillator...hold your nose and buy some homebuilders... or homebuilding-related entities... We had the CEO of Owens Corning (OC)...they do insulation... of course, also windmill composite blades...and how about this one?... Toll Brothers (TOL)...you know we like Bob Toll... If the stock's under $20, you gotta buy it.

How about retailers?... They work too... Costco (COST), Wal-Mart (WMT*), and the high-yielding Jones Apparel (JNY), which has made some good moves of late, and should soon be getting some fantastic business from WalMart. I think VF Corp. (VFC) works here too.

What not to buy as part of our oversold rally?...

Well, I've got to tell you...  You don't buy what's overbought when you're oversold.  And the oil and gas plays, which you know I like...are going to come in here...and that's your chance to buy them...  Don't buy them now... Wait until they get oversold, including the wildcatters and the majors.

The oscillator tells the tale best for beating up oversold stocks, and not the overbought... which will most likely be ignored in this rally.  I'm not backing away from the oil and gas plays...I'm just pointing out that next week may not be their week. You saw some of that today with a lot of them in a big up-160 day.

Why not buy them lower? Why does the oscillator work?... Because things are generally never as gloomy as people believe.  When the oscillator is oversold and everyone keeps selling...and it's never as great as people believe...because buyers got too enthusiastic or sellers too pessimistic... See, it's really a psychological depiction...This is greed... Everyone got too greedy up here, so it goes down... And this is fear... everyone gets too fearful here so it goes up and goes back to equilibrium, and that will be all I ever talked about technical analysis again.

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