Call it the great December bank rally. The big bank breakout. Call it something, but definitely take notice of it.
Here’s why: No one is championing it. The only research we see on it is negative. We keep hearing number cuts. We keep hearing about attorneys general blasts. We keep hearing about departures of CEOs and a strong belief that next year will bring nothing good. We keep hearing that home prices are going down — more on that in a later posting.
And what is the group doing? It is going higher. Onward and upward higher. I could see the banking index (BKX) going to 58 on this move. I have been pushing the banks everywhere, and I see very few believers.
People have all been burned so often that no one can blame them for not wanting to talk about them, let alone buy them. But when you see moves based on nothing, no sponsorship, no good news, endless carping about QE2 — heard a ton of that just today again! — and Bank of America(BAC)/Wells Fargo(WFC)/JPMorgan(JPM) are going up in giant gulps and taking out levels that were supposed to stop them, you have to ask yourself can you afford to miss PNC(PNC) or JPMorgan? You want to stay in the defensives, which act awfully?
I like the materials stocks, but let’s understand that it would be nice to own something that’s got momentum in earnings — the materials — but something that’s cheap vs. where it could be next year and, by comparison with Europe, in sterling shape. Well-capitalised. Sought after, as per the earth-shaking Marshall & Ilsley(MI) bid.
Spreads widening as per the much-criticised QE2. Home prices stable. Two big bears, Nouriel Roubini and Meredith Whitney, going away from their negative theses, with Whitney focused on California revenue bonds. This is the group. And just wait until the press and the analysts turn positive.
They are still yammering about foreclosures and bad sales, even though foreclosures peaked already and bad sales aren’t bad. I expect the bandwagon to be big by these same naysayers in 2011. But not until after the bulk of the move is made. At the time of publication, Cramer was long PNC and JPM.
Jim Cramer is Founder and Chairman of TheStreet.com and writes several times each trading day on TheStreet RealMoney. Click here now to get actionable, investment ideas from Jim Cramer and 60+ market commentators on TheStreet RealMoney.
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