Oil stocks have been a kind of black gold in recent weeks, as crude has surged from about $84 per barrel in mid-February to last week’s $103.41, riding unrest in the Middle East.  It’s possible that Gaddafi could blow up pipelines to rattle protestors, disrupting Libya’s 1.6 million barrels a day, and that Algeria, which produces 1.25 million barrels per day, could be the next site of unrest. 

While stocks rallied on the news from Saudi Arabia that it would plug any oil holes, Jeffrey Saut at Raymond James doubts the country could make good on its promise, and thus is also “skeptical” of the rally.

Saut projects an intermediate trend back up, with ultimately a 5% to 10% correction in U.S. stocks, based on high bullish sentiment (69% “Bulls” according to Market Vane) and a low Volatility Index, indicating complacency. 

His next move? To buy on bouts of weakness, particularly large cap stocks in the S&P, companies with low price/earnings multiples, those that pay high dividends or have low institutional ownership, and those who earn their revenue primarily in the United States.