Though the market didn't bounce back completely on Tuesday, it did at least check off a few boxes on Jim Cramer's market rally checklist. So could the market be in for more pain? He thinks that it took at least a step in the right direction.
The S&P 500 (.SPX) and Nasdaq (.IXIC) ended up slightly on Tuesday, finally breaking a three-day string of losses, while the Dow (.DJI) finished lower over concerns on the global economy. The Dow Jones industrial average fell 5.88 points, 0.04 percent, to 16,315.19, while the S&P 500 gained 2.96 points, or 0.16 percent, to 1,877.7. The Nasdaq Composite added 13.52 points, or 0.32 percent, to 4,227.17.
"I am a huge believer, and I say it every night, that there are always better moments to sell than into panic," he said.
Cramer recommends waiting through the bounce, though it was short lived on Tuesday, before selling. More than anything, the "Mad Money" host added that this bounce only gave investors a chance to catch their breath and change their course of direction.
That's right, Cramer said it's time to do a course correction. There are just too many unresolved issues on his 10-step checklist that need to be resolved in order for the market to have a sustained rally.
Investors tend to assume that when the price of oil tanks, as it did today with its $4 decline, than there must be something wrong with the fundamentals.
What if it the oil market is just like the stock market, and the buyers and sellers are actually controlling the market?
Cramer doesn't think this is a ridiculous idea. He suspects that the real force that is controlling the price of crude is the buyers and sellers themselves, as a result of forced liquidations and margin calls among overly bullish hedge funds. To gain further clarification the "Mad Money" host turned to Carley Garner, technician and co-founder of DeCarley Trading to explain how this could really happen.
According to Garner's research—based on a chart of the West Texas crude that shows CFTC's commitments of the big institutional players—in June, speculators were holding net long positions in crude futures. When the price in oil began to fall, the speculators in the market began to suffer losses as a result. However, the hedge funds selling crude did not sell, and are now being forced to sell because they bought these future contracts on margin. Now that the value of these contracts has dropped, the margin clerks at investment banks are requiring them to put up more capital or sell their positions.
Garner indicated that the price of oil may continue to go down until these forced liquidations are completed. "Worse case, Garner sees oil bottoming in the high $70s, and at that point, she expects a big rebound, because crude is already in incredibly oversold territory that almost demands a bounce," Cramer said.
Here is the good news: Cramer thinks that as soon as the weak handed bulls have finished selling, the markets will reverse when they are flushed out.
There is one quick-service restaurant that has embraced the technological landscape into its business model, and is reaping the benefits by moving full steam ahead with profits in pocket.
On Tuesday morning, Domino's Pizza reported a stellar quarter, and the stock rose 11% to an all-time high. The company delivered a 2 cent earnings beat on higher than expected revenues that rose 10.5% year over year. The cherry on top of the ice cream sundae, was that Domino's posted a 7.7% rise in its domestic same store sales and a 7.1% increase in international same store sales, which was much more than what the market was expecting.
"These numbers were phenomenal, which is why I think the stock deserves ever single penny of today's gains," Cramer added.