Tuesday, May 26, 2009
(Cont'd from above)...

Jim (cont'd):   

And with that cycle of pain complete… with the total loss of the markets leadership… the bears seized control of the airwaves… as a bull, I felt overwhelmed…. bereft of leadership… and with nothing left to root for… but as I have told you many, many times since the bottom… this markets hallmark, every since the rebound began, has been resilience.. today we saw that resilience… the monster rally… that big move up in the Dow… the S&P 500 soaring more than 2%… the Nasdaq up over 4%… and I need you to understand exactly what that means… exactly how resilience works in the golden bull market… or to put it another way… what are the rules that govern a bull market… it is all about rotation… a rotation after weakness right back into what started the rally in those dark days of March… the sudden lust… for technology stocks.

The terrible markets shoot the leaders one by one… and they stay dead… terrible markets no Jason, no Freddie Kruger, no vampireless stat… that was like the chic book, Dracula… no Brahms Stoker for that moment… no come backs… just rigor mortis and Potters field… that is not where we are… great markets allow the leaders to refuel with 5% to 10% mini pullbacks… after which they start flying all over again.. and we are in one of those great markets.

Consider this, Apple roaring into May hitting $132... then plunging down to about $120... held there, down about 10%… Research in Motion, retreated 7 points off of a $77 base… held, 10%… Google shed 15 points… really strong stock… down 5%… these were are leaders, our generals… and they held just where they had to… standing like a stone wall to interject the wrong side of the Civil War reference.

Then it was oils turn… Chevron goes from $70 to $64... 8 % decline… Exxon drops 3 off of a $71 base… a little less than 5%… OXY, Devon give up 9%… same thing… they pull back to exactly to where they caught their breath… but only so far.

Finally, last week the banks took it on the chin… all of them… the banks that did not need to do equity deals fell about as much as the techs and the oils… they held again… these generals, these leaders will not let a strategic retreat turn into a route… and that is exactly the way that bull markets work… once each leadership group has pulled back 5% to 10% level… the stocks are done resting… and then they can rally back on the slightest of reads… and we got a slight read today on what normally would have been a yawner… you heard about it all day… funny, consumer confidence… it is true that we care a little bit about consumer confidence… no doubt… one that showed more than of an uptick than anyone expected… I am talking about the Michigan thing… however, this Michigan index measures how a couple of people are feeling… not really any more than that… it is like if the right baseball team won the night before… or if they voted for the guy who beat Adam Lambert last week… or maybe they bowled a 200.

Oh, and some people probably felt darn good about the stock market rally too… talk about a self fulfilling prophecy… stocks go higher… confidence is boosted… then we figure that more people go shopping for fat pants at Kohl’s among other things… then we buy a bunch of stocks to celebrate the fat pants at Kohl’s number… it is just that simple… or is it.

Now, you heard all of that all day today, that this confidence number was the reason for the rally… hey come on, we have got to make up something… I am telling you that it is a bunch of nonsense… there was a lot of talk also that our off the charts segment, about how we were nearing support of the S&P 500... I am not buying that either… here is what I am buying… on Friday we completed the rollover of all three leadership groups… with these leaders knocked down we created a wall of worry… tech being the brick, oil being the razor ribbon, and the banks being the claymore mines… making it impossible for most people to scale… once that wall was complete… once each group had pulled back to exactly to where I told you that you must buy… down 5% and 10%, those magic critic numbers… we were ready to roar.

That is how Apple could rally almost 8 points today… Google close to 10... Research in Motion jolt up $4.75... that is how the oils could rally so convincingly today.. and it is how the banks could have a 4% run… not because of the consumer confidence, bowl 200, Cleveland Indians won, bought fat pants.

Now, what is the real take away here… consider this… as we lost leader after leader, all we heard about was that there was going to be a big correction… oh boy, how about that… here it is… it is finally upon us… it is really scary… something monstrous that would take us down dramatically… each speaker, each person quoted it, they spoke in unison… one tongue, one voice… that by the time the banks were rolling… time to rolling over… here it comes… here comes the gigunda correction… it is now ready to begin… sell, sell, sell… and what happened if you listened to them, instead of believing in the markets resilience… you sat out a beautiful rally… but if you used Cramer’s bull market rules… the ones that I identified after 30 years of trading… the ones that stay strong stocks can be expected to pullback no more than 5% to 10% before they start back up… you would have run to the bull… not away from them… like all of those Pamplona jokers have all been doing over the last couple of weeks.

Here is the bottom line…

▼   ▼   ▼   ▼   ▼

The Bottom Line!:     You cannot afford to lose faith in this market… and I am indeed a televangelist for money… you cannot wait for the Dow to go back to 6500 if you want in… don’t bother if that is your entry point… go watch someone else… and certainly do not hold your breath… don’t watch somebody else, stay with me… just wait until the next 5% to 10% pullback in order to buy… because after today with the leadership back and the market ready to roll.. I think that that is probably all you are going to get.    Alright, some people lost faith in this market… why, because tech rolled over, then oil rolled over, and then when banks rolled over… I said that they all stop between 5% to 10% decline, and that is when you pull the trigger… do not be shaken out… be staying in.

[verbatim recap]

[verbatim recap]

[end of segment]

Read Jim's next Segment here  

Read Jim's next Segment here