Cramer: The market’s great beat-spectations

Charles Dickens would have been proud of the market on Tuesday. Remember the popular phrase, if you go in with no expectations, they will always be beat.

The reduction of expectations can be attributed to the glorious win for the bulls on Tuesday, with the Dow Jones industrial average closing up 1.12 percent and the S&P 500 ending the session up 1.19 percent.

Jim Cramer thinks that at a time when company stocks are flying all over the place, it is a good idea to figure out what people are expecting. He knows that often it is the expectations, not the numbers themselves, that decide the direction of a stock when a company reports.

Case in point: Buffalo Wild Wings. This company represents two of America's favorite things—wings and beer. Since the price of chicken wings have skyrocketed this quarter, most expected a dramatic shortfall for the company.

Whoops. When Buffalo Wild Wings reported, it actually beat expectations and guided up. As a result, the stock closed up more than 13 percent on Tuesday.




Trader on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Trader on the floor of the New York Stock Exchange.

Even stocks like Apple can move when no one thinks there is a reason to. A lot of speculators thought that Apple Pay would not be a big deal. Talk about low expectations. Meanwhile more than a million people have already signed up for the payment system.

Cramer would not be surprised to see that Walgreens picks up the share from CVS and Rite Aid, who have not adopted the payment system.

"I think Apple's stock is going up because Apple Pay may be the next big thing for a company that was supposed to be out of next big things," Cramer said.

On the flipside, the same thing happened to Twitter. It thought that its monthly average user growth would accelerate. Whoops. Turns out that it was not accelerating, and now the stock has taken a clubbing.

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Nevertheless, the market continues to march to the tune of expectations. Cramer knows that it will get violent reactions when a company can't keep them low enough, or if the market pummels them too much ahead of the quarter.

The market rallies on a day like Tuesday, because we got blowouts when we only expected a little. Little expectations cause big market swings, which cause a bullish session.

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