Sure retail stocks have been overlooked in light of the battered consumer. A lot has to happen in order to stop the American consumer from shopping. Instead of spending recklessly, they will look for bargains. These are the stocks that are poised to do well in challenging economic times. They are TJX and Costco. These retailers have great merchandising, are operationally focused and have strong operating results. From a chartist’s point of view, these stocks are in an uptrend. In any sector, it pays to go with the winners. In retail, these two stand out.

The main reason that oil prices are surging is simply due to supply and demand. More people are using it but production is barely catching up. Private sector major oil companies such as Exxon are just maintaining production. They are being shut out from exploration plays by governments and environmentalists. As a result they have less exploration opportunities. Prominent environmentalists such as Al Gore and David Suziki complain that we have to break our addiction to oil. They advocate that more land be put aside for nature preserves, not to produce oil and gas. Mean while, they fly around in their chatered jets to rake in speaking fees. Take a look at the Kyoto conference in Bahli. 20,000 people flew in to attend the conference on how to save the planet. The airport was brimming with private jets. These so called environmentalists want us to curtail demand, pay higher prices when in reality they are the biggest users of carbon fuels. Just don’t blame the oil companies, blame these so called environmentalists.        

There will be certain pockets of strength within the US economy, such as agriculature, energy and exporters. For the overall economy to truly recover, the housing sector needs to show signs of stabilization. As long as housing prices are dropping, people are less likley to spend. The widely followed S&P/Case-Shiller home price index fell 14.4 percent from a year earlier. It suggests that the housing sector has not hit bottom yet. There is still more sellers than buyers. The excess supply of housing still needs to be absorbed. Foreclosures are expected to hit a peak sometime this summer. For now, it is best to avoid industries exposed to this sector, including financials and consumer discretionaries. To guage a turnaround in this sector, look at the XHB, the housing ETF. The stock market usually predicts what will happen 6 months ahead. This is one ETF to buy on dips.   

Despite its lofty P/E of over 35 times, Apple stock looks poised to break its old $202.96. The company is integrating its MAC operating system with its devices. Accessing the web will be seamless, especially with wireless devices. Lead by Steve Jobs, the company is delivering what customers want. They are the leaders in most segments they operate in. They also have pricing power. Sure the stock is very pricey. It pays as an investor to go with the winners. Quality does not come cheap. It’s always profitable to follow the trend. For Apple stock, it’s means the price is going higher.

While Americans are enjoying their long week-end, the Chinese are looking to secure oil supply to feed their fast growing economy. According to Hong Kong’s South China Morning Post newspaper reported on Monday, citing unnamed sources, Chinese oil firms are considering investing in Canada’s Talisman Energy Inc. and Australia’s Santos Ltd. Given the current environment, especially if oil stays above $100, it is cheaper to add production through acquisitions than exploration. New frontiers for oil exploration is becoming more cost prohibitive and politically risky. It is more cost effective to use investment bankers than geologists to add to a company’s oil reserves and production. Given the quick run up in oil stocks, one should snap them up on correction. More mergers and acquisitions in the energy sector are on the horizon. The energy bull market is not yet over.  

Stocks are taking a break from their strong run from the March lows. The markets are likley to consolidate their gains between the 50 day and 200 day moving average. For the markets to go higher, corporate profits will need to be higher. The reality is that not all industries will do well. With the housing collapse, the credit crisis and over burdened consumer, housing stocks, retailers and financial stocks will probably underperform. The excess of speculation and easy credit will take time to work out of the system. The investor should stick with industries that are doing well and enjoy strong profit growth. Most notable are the technology sector, food companies and commodities. This market remains a stock picker’s market. 

The hot money is going into oil stocks right now. The ag stocks, noticeably the fertilizer stocks, are correcting. The momentum is gone for now. Longer term, the outlook for agriculture remains compelling. Strong demand from a wealthier more populous global population means that prices will stay high. With high oil prices and growing risks of supply disruptions, the biofuel movement will unlikely subside. A lot of these fertilizer stocks are consolidating their recent gains. They have strong cash positions and are using the money to buy back stocks. The long term uptrend for these stocks is still intact. Buy on weakness. 

Given the nice run up since Mid March, the major stock indices are likely to take a breather and consolidate their gains. The bottom was the collapse of Bear Stearns. Coming from the March lows, the major stock indices such as the S&P 500 and the NASDAQ blasted through their 50 day moving averages and touched the 200 day moving averages. The recent gains need to consolidate. Headwinds to higher stock prices continue to be the after effects of the credit crisis, higher food and energy prices and a weak housing market. Take some profits at the 200 day moving average and re-establish positions at the 50 day moving average. This market remains a stock picker’s market. To make good returns, stick with the winners. They include energy, technology, materials, agriculture and infrastructure. The weaklings are consumer discretionary and financials.  

Despite GE’s announcement that they are getting out of the low growth appliance business to focus on higher growth areas, the stock is still languishing near its 52 week lows. At $32.14 this morning, it’s not that far removed from the 52 week low of $31.55. Investors realize that it will take time and effort to change a corporation with $173 billion in annual sales. The credit crisis had severely affected its earnings. The bright side for GE is its infrastructure, environmental and energy business. With the rapidly growing economies of the developing nations, these businesses should do well. With a yield around 4%, GE is a good long term buy. This a stock to buy on dips. 

The United States today made the polar bear a threatened species, granting protected status for the first time to an animal due to global warming while providing provisions to ensure continued oil and gas development. No surprise with this announcement. Ultimately, the average American wants to be able to afford heating their homes and filling up their gas tanks. Politicians are keenly aware of this. They are just paying lip service in order to come across as doing something to protect the environment. Restricitng access to oil and gas exploration will only lead to higher energy prices and greater reliance on oil imports. The OPEC producers are laughing all the way to the bank.