Jim Cramer saw some classic signs of a market bottom Thursday morning, but forced-margin selling came into play Thursday afternoon, wiping out chances for a bottom, he said on his "RealMoney" radio show.
"Too many people own too many hot stocks with margin debt," said Cramer. When that happens and stocks go down, borrowers must either send in more money to their brokers or the broker will sell the stock out from under them.
Most of the time, it's the latter that happens, he said. Forced-margin selling usually begins around two o'clock, said Cramer, and sure enough, as the two o'clock hour approached, the market began to sell off.
Cramer said Thursday's action was reminiscent of what happened during the dramatic market declines of 2000, in the wake of the tech bubble. But, the difference this time, he said, is that most companies are real companies with real profits.
Thus, Cramer expects to begin seeing analysts upgrade beaten-down stocks. He also thinks analysts whose estimates for oil are too low may begin to raise their price targets. And, companies seeing their stock prices fall precipitously are more likely to start buying back stock.
For those who are on margin, though, said Cramer, "Get off margin right now. ...Margin is horrible."
Cash is King until further notice!!!
My comments on companies are usually my opinion of long term success (years). The PPS may go up or down greatly in the meantime depending on the number of greedy suckers with money.
