Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Charles Payne, CEO Wall Street Strategies.

Trading Pit

The stock market is in rally mode!  Just when it appeared the market was ready to give back a lot of those big gains, buyers came roaring in on Friday, gave the Dow a triple digit gain, and made it a winning week for the blue chips (search).

Charles believes a new bull market is being created, but investors should be prepared for a lot of volatility. He predicted the market will suffer a major dip and investors’ confidence will be greatly tested.

Tobin thinks the bulls and bears are in equilibrium. Like Charles, he is in the “buyer beware” category. Toby advised to only buy on big dips (more than 200 points on the Dow). He said to pick and choose your buying opportunities carefully now, because in October the market will take off and the Nasdaq will hit 2000.

Gary B. said now is the time to buy more!  He charted the Dow since March of this year and thinks it can keep going up from here. Unlike Charles and Toby, Gary B. does not think there will be a big dip, but he added that this market will confuse and frustrated investors.

Scott is staying cautious because the market has made a huge move and is now consolidating its gains. He advised buyers to buy on weakness, but does not think any period of weakness will last a long time.

Pat said the market’s dip earlier in the week was not much of a pull back. He is still waiting for stocks to get cheaper because there are not a lot of attractively priced stocks.

Stock X-Change

Charles, Tobin, and Scott all picked stocks that have missed the recent rally, but are about to bust out. 

Tobin chose Technitrol (TNL), because it has a lot going for it now, it’s getting into electronic manufacturing services and is addressing new markets. This should be a $25 stock, not a $15 stock. (Technitrol closed on Friday at $15.40.) Charles and Scott do not like this stock. 

Scott selected Siebel Systems (SEBL).  He likes that the company is cutting costs, the demand for its business is increasing, and there is minimal downside.  But, both Tobin and Charles don’t like it. Charles pointed out that the stock is cheap relative to its peers, but it missed earnings twice in the past year. (Siebel Systems closed on Friday at $9.42.)

Charles picked LifePoint Hospitals  (LPNT) because it has grown over the last year, is a relatively safe stock and is tremendously undervalued compared to its peers. Charles thinks it will hit $30 within the next year. (LifePoint Hospitals closed on Friday at $24.11.) Tobin and Scott said the risk is minimal, and the stock has great upside. 

Chartman

Gary B. and Pat rejoined the show to look at two brokerage firms that are benefiting big time because people are buying stocks again. 

First the pair looked at Charles Schwab (SCH), which is up 75% since the lows for the year.  Gary’s said his chart shows it’s strong and getting stronger. However, he would sell the stock if it dropped below $10.50. (Charles Schwab closed on Friday at $11.48.) Pat likes the fact that Charles Schwab focuses less on online business. But, he said its new focus to concentrate on money management for wealthy clients is not working.  Also, it has made bad acquisitions and is still searching for answers.   

Next the two looked at E*TRADE (ET), up an amazing 151% since the lows for 2003. Gary’s said it had moved sideways for a month and then in July, it broke above a line of resistance around $9. He advised to buy the stock on any dip, but warned to get out if it dropped below $8.  (E*TRADE closed on Friday at $9.57.) Pat pointed out that E*TRADE made a good move changing its CEO, and this led to good cost cutting moves. But he added it now has to compete with bigger companies. The stock is way too expensive for him and he would only buy it if its price was cut in half. 

Predictions

Scott's Prediction
Internet sales tax next year; Amazon.com (AMZN) nearly halved

Pat's Prediction
Buy Freddie Mac (FRE); the risk is worth it.

Gary B's Prediction
Nasdaq dip gets scary; but time to buy is at 1600

Charles' Prediction
Time to move out of housing stocks; about to fall 20%
(Charles specifically said to stay away from Centex-CTX and Lennar-LEN.)

Tobin's Prediction
Drop in gas stocks an opportunity; buy EOG Resources (EOG)