Nymex to hit USD 115/bbl: Schaeffer's Investment

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Todd Salamone of Schaeffer's Investment believes that there is still money lying on the sidelines or short covering potential that could drive the stock market higher.

With crude oil prices on the rise, Salamone expects Nymex to touch USD 115 per barrel once it breaks thorough USD 100 per barrel.

Below is an edited transcript of Salamone's interview on CNBC-TV18. Also watch the attached video.

Q: How are things looking to you on Wall Street at this point in time?

A: We had some very bullish economic data today. Now the key is how that is going to look going forward but certainly we are on an uptrend. There have been a lot of fears about employment here in the US but yet we have had several reports over the last several weeks where jobless claims have come in better than expected.

There have been a lot of concerns about housing yet we have got some very bullish housing data today. So we have a pretty good combination where we were seeing the macro data trend better than expected; we are seeing the stock market move higher. So this suggests that there is still money lying on the sidelines or short covering potential that could drive the stock market higher as it trades around some very important technical reasons at these levels.

Q: There is also the threat of a downgrade of financials and banks from Moody's, a possible review and a downgrade coming. How are you reading that and how do you expect financials to react if indeed it becomes a reality?

A: Yes, it's interesting. They put it on review but judging by how any of these credit agencies have impacted the price action after a down grade; back in August, they downgraded US debt yet treasury bonds have rallied since that downgrade. So many rating agencies recently downgraded some of the European countries yet their auctions have gone off fine.

So again, if you are just using past precedent, I don't expect these downgrades to really impact the financial stocks. Yes, in the near term, they might but even the benchmark for core financials is slightly higher today yet we are seeing another example of the actual companies or countries being downgraded just dismissing that downgrade as if it has already been factored in.

Q: What is happening in the crude space? The prices are on the boil. What kind of levels are you working with; Brent nearing the USD 120 per bbl mark and Nymex crude also above the USD 100 per bbl levels?

A: We are looking more at the Nymex crude. I think crude has been trading sideways; it is actually back in November when it first went to USD 100 - that's the level we are watching and it has gone sideways since it approached that level. But then, the next level we are watching if we break thorough USD 100 per bbl would be USD 115 per bbl, which was the April last year's high.