Bears in the Spotlight

Morning News of Note:

• EMR: Emerson Electric-EMR awarded major automation contract from BP. Emerson has been named the main automation contractor for the replacement of aging process automation systems at BP's three largest U.S. refineries
• ADM PEIX DVSA: Can Ethanol Pump Up Investors' Returns? THE GRASS IS GETTING GREENER for ethanol, the alternative fuel that may offer investment opportunities in the coming years. In his State of the Union address last week, President Bush talked up "cutting-edge methods of producing ethanol," because, as he put it, "America is addicted to oil." Cellulosic ethanol, derived from wood chips, grass and other natural waste, is cheaper to produce than corn ethanol and could be at gas pumps within six years, the president said. (Full Story) BARRONS
• TWX: Time Inc. Plans Salty, Secretive Web 'Magazine' The latest magazine from the world's largest magazine company isn't really a magazine, and its creator won't talk about it. But it is symbolically, even strategically, important. Time Inc. is expected to launch a Web site called Office Pirates in coming weeks -- and details are scarce because in the online world, building buzz through traditional marketing is not only ineffective, but it could also scuttle the word-of-mouth appeal. (Full Story) WSJ
• US Economy: WSJ survey of economists; majority est fed funds 4.75% by June, sees rates holding 4.7% through end06; about 75% said Bernanke more likely to raise rates too high
• Fund Flows: equity fund inflows $771m, ex ETFs inflows $4.2bln; ex ETFs financial/banking funds rptd lgst outflows ($72m) since 4/13/05; ex ETFs gold and natural resource fund inflows trailing 4wk avg $360m/wk; ETF flows: EFA $514m, DIA $434m, IVV $190m, IJR $169m, SPY ($2.21bln), QQQQ ($901m), IWM ($889m), XLE ($642m), IYR ($361m), XLF ($296m); taxable bond funds rptd inflows $1.3bln, ex ETFs inflows $1.5bln, corp fund inflows $399m, HY funds rptd outflows ($40m); money mkt funds rptd outflows ($4.669bln) -- AMG Data
• Mad Money Summary: Cramer opened his show up by admitting that he can make mistakes, such as his call on Pain Therapeutics (PTIE). He recently was negative on the company in his Lightning Round because he felt the company was too risky. He has reevaluated the company and believes it is on the cutting edge of modern medicine, developing state of the art pain killers. Cramer then discussed Public Storage (PSA), which owns and operates large storage facilities, which he believes will be prosperous because "people like to own stuff." The company posted a great Q4 and is currently bidding for Shurgard Storage Centers (SHU). Cramer said that Ryder (R) is also a play on the storage trend. Cramer then focused on Essex (KEYW), which he said " is basically a bunch of PhDs with high-level NSA clearance doing tons of spy work for our government," and could make investors a ton of money if they invest before the story hits Wall Street's radar. Reading his mailbag, Cramer said Clear Channel Communications (CCU) was a bad stock to own, profits should be taken on Rediff (REDF), ABB (ABB) was worth taking a look at as a play on nuclear energy and Take-Two Interactive (TTWO) was a bad play in the video game industry. In the Lightning Round, Cramer was bullish on American International Group (AIG), Albany International (AIN), Dynegy (DYN), Maverick Tube (MVK), Hexcel (HXL), Advanced Micro (AMD), Sirius Radio (SIRI), Statoil (STO), Navteq (NVT), Grainger (GWW) and Ameritrade (AMTD) and was bearish on eBay (EBAY), Lucent (LU), Crocs (CROX), Activision (ATVI), Time Warner (TWX), American Axel (AXL), XM Satellite (XMSR), Juniper Networks (JNPR), Oracle (ORCL), Ashland (ASH) and Satyam (SIFY).

Market Comments: The market sold off into the close yesterday, and that selling has continued from the open this morning. Energy stocks are again extremely weak. This is a bit odd considering how high oil still is. Unless you think there is going to be a global recession.

Chip stocks are also down quite a bit this morning. But that group has had a big runup so far this year, so a correction should be expected. I will be looking to take advantage of weakness in both groups in the near future.

The SPX hasn't broken below Tuesdays lows (1253), but it's close. I as posted yesterday, the index got up near 1275, which proved stiff resistance. Now the market comes back down, which should bring out higher levels of bearishness and help form some sort of bottom.

These short-term bottoms are usually more of a process than an event, which is why we simply need to continue to monitor the price/volume action, gauge investor sentiment, and prepare our buy list so we are ready.

long EMR, TWX