Cramer: The Real Reason Behind Tuesday’s Move
Posted By:Tom Brennan
Topics:Consumers | Technology | Stock Picks | Stock Market
Sectors:Financial Services | Oil and Gas | Technology
Companies:Exxon Mobil Corp | Chevron Corp | Google Inc | Research in Motion Limited | Apple Inc
Forget all that talk about a better-than-expected consumer confidence number sending the market higher, Cramer told viewers on Tuesday. And don’t think the Apple [AAPL Loading... () ] upgrade had anything to do with it either. These are not the reasons that the Dow jumped 196 points or the Nasdaq finished the day up 3.5%.
Tuesday’s snapback after Friday’s losses was just a typical bull market in action, Cramer said. The market’s leaders – tech, oil and bank stocks for the move starting in early March – had lost between 5% and 10% and were ready to resume the rally. All they needed was a catalyst, any old excuse, and that’s where consumer confidence comes in. But it could have been anything, really.
Need proof? Look at tech: Apple reached as high as $132 in May before sliding back to $120, a decline of about 10%. Research in Motion [RIMM Loading... () ] fell $7 from $77, a near 10% dip. Google [GOOG Loading... () ] lost about $15, or 5%. In oil, Chevron [CVX Loading... () ] pulled back 8% to $64 from $70. Exxon Mobil [XOM Loading... () ] slipped just under 5% to $77 and change. And the banks followed a similar pattern.
Once the pause was complete, the market was again ready to move. This is how bull markets play out. Hence Apple’s near $8 gain, Google’s near $10 and RIMM’s near $5. The banks as a group added 4% to Friday’s close, and the oils rallied as well.
Let this be a lesson to all investors: Watch for these kinds of bull-market pullbacks, because they often precede a continued move higher. If you missed the rally’s first phase, then these dips give you a chance to get in on phase two.
Most importantly, though, ignore the bears that predict a much bigger correction to come. The Dow won’t see 6,500, so don’t expect more than the 5% to 10% dip we’ve already seen.
“I think that’s probably all you’re going to get,” Cramer said.
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