Market is headed for froth—time to sell stocks?

Cramer: Market optimistic
Cramer: Market optimistic   

Jim Cramer is standing back to watch the market fall in love with everything these days. It's like it took a fistful of antidepressants and is applauding everything that comes along.

"In fact, this market's so welcoming it's almost comical, and I could argue that it's starting to get a little too sanguine about every move a CEO makes," the "Mad Money" host said.

And while some of the love stems from the natural rotation of stocks due to a strengthened economy, Cramer is worried that this could also be a recipe for frothy disaster.

With the global economy improving, Cramer sees that the big cap stocks are making huge moves lately. Stocks like Disney, Boeing, Honeywell and even McDonald's have all risen as a result.

Jim Cramer on Mad Money.
Jim Cramer on Mad Money.

The major undercurrent to Monday's market that helped to drive the big cap stocks was thanks to Warren Buffett praising those who own this breed of stock over the weekend.

"In his even more brilliant than usual investment letter, Buffett says if you believe in American progress, you have to own, long-term, great American businesses. If you don't, you should buy bonds," Cramer said.

And that's just what the market did. However, external of the Buffett euphoria, it was external situations that were viewed with rose-colored glasses that made Cramer worry about froth in the market.

For example, Cardinal Health announced it would buy Johnson & Johnson's Cordis cardiovascular unit for $1.94 billion. Typically, the market would pick one company of this type of transaction as the winner. But instead, both stocks rallied on Monday. That is unusual.

Or how about MasterCard? Recently Costco announced it would end its relationship with American Express and go into partnership with Visa instead. One would think that Visa would soar, while MasterCard tanks in this case.

Instead, the market acted like both stocks won the game, and MasterCard rallied right alongside Visa.

"Talk about positive! That's just plain bizarre. A big smiley-face of a move," Cramer added.

Another event that shocked Cramer was Netflix. Normally, when a company has good news, the stock rallies on the day of the positive news and then has a post-news selloff. Thus, when Netflix released the new season of "House of Cards" on Friday, the stock rallied. Instead of selling off on Monday, the stock kept roaring!

So, based on all of this unusual and frothy behavior, should investors start selling? No.

If Cramer really thought that the market was in dangerous territory, he would tell people to sell like he did back in 2000 or in September of 2008.

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"I can't tell you to bet against the market just because we finally breached Nasdaq 5,000 and are headed to all-time high territory. I wish people were more critical, of course, but the fact is, there are good reasons for the bullishness."

So while Cramer does fear that the market isn't finding fault with things it usually does, he doesn't think it is approaching froth. The market has not gone crazy…yet.

"As long as we don't go all high-wire and devil may care, I can make my peace with it. Maybe happiness isn't so bad after all," Cramer said.

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