Buy Stocks On Expected Obama Rally

President-elect Obama’s plans to stimulate the economy by spending billions on infrastructure, with the aim of creating over four million jobs in two years, should create an Obama rally in the early days of his presidency.

The new administration takes over in just eight days, so barring some more woeful economic news that the markets can’t shrug off, we expect that we will start to see an Obama effect on stocks starting this week.

As such, we would recommend taking select long positions. Look for stocks that are exhibiting bullish signs in early trading today and start accumulating positions. Narrow selections down to infrastructure plays, such as Chicago Bridge and Iron (CBI), as well as Caterpillar (CAT).

There are risks, as we are now entering earnings seasons, as well as economic related news to contend with, but in all, traders should be able to score some points off the incoming administration.

If you do go long on expectation of an Obama rally, while an actual passing of an Obama stimulus plan by congress down the road may give further lift to stocks, this is not a long-term recommendation. So if you take positions this week and stocks do move up, lock in profits and later on when congress starts debating an Obama infrastructure bill, you could look to enter into long positions again.

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