And while I think crude is pretty extended in the short-term, I have become increasingly constructive on natural gas over the past number of weeks, even though that goes against the opinion of Raymond James’s energy analysts.

Coincidentally, Minyanville Professor Vitaliy Katsenelson sent me this email on Friday:

Six reasons why natural gas is a better investment than oil:

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1. Reserves deplete faster than oil (in general).

2. The oil/natural gas ratio: The price of oil divided by the price of natural gas is at or near an all-time high. This ratio stands at 17 (historically, it's been at about 8 or so). Natural gas prices will go up, oil will decline, or both.

Also, natural gas isn't a good hedge against the declining dollar (since it's a domestic commodity, for the most part), and storage capacity is more limited; it thus isn't as much admired by speculators as is oil. This helps to explain why it lagged the spectacular performance of oil of late.

3. At $4, it's uneconomical to develop and look for new natural-gas reserves.

4. No OPEC competition. LNG (liquefied natural gas) imports are uneconomical at these prices.

5. Politically more favorable than coal.

6. After emission caps are implemented, natural gas will become a cheaper alternative than politically and environmentally unfriendly coal.

Obviously, I agree. Favorably rated names from Raymond James’ research coverage include Apache (APA) and Occidental Petroleum (OXY).

The call for this week: Over the weekend, George Soros said that the worst of the global crisis is behind us. And yet, the World Bank said this morning that prospects for the global economy remain unusually uncertain and lowered its world growth assumption from -1.7% to -2.9%.

Typically, the first stage of a rally is driven by liquidity. Markets then tend to rest until improvement in the economy becomes evident, sparking another rally. That’s why I have been embracing the stock market’s 2003 pattern, and why I think it’s a mistake to get too bearish. Nevertheless, since the March lows, I have often repeated that I can find no instance where the equity markets became vulnerable in less than 3 months after making a generational oversold reading.

Regrettably, we’re now more than 3 months from those lows, and I remain cautious.