GO
Loading...

Jim Cramer: Problem That Stocks Are at 5-Year Highs?

Front page headlines scream that the S&P is sitting at 1500. Pundits insist the market is about make new records. Time to cash out?

Sometimes too much bullish sentiment is a sign of the top. And it appears there's a lot of bullish sentiment in the market right now.

Retail investors are rushing into the market with vigor. Over $22 billion flowed into long-term equity mutual funds and exchange-traded funds in the week ended Jan. 9, according to Bank of America Merrill Lynch. That was the second-highest amount on record after the $22.8 billion that went into all equity funds in September 2007.

That kind of inflow is often cited by contrarians as a sign of the top. Are these the clarion calls to sell?


Jim Cramer doesn't think so.

Although the Mad Money host always feels it's prudent to take profits and wouldn't be surprised to see markets sell-off a little – he thinks any pullback is an opportunity.

Cramer isn't a fan of front page headlines. Instead he likes to dig deeper into the newspaper for insights. And he's identified a handful of stories that he says lend credence to the recent gains – and perhaps set the stage for a further advance.

wdstock | E+ | Getty Images

Cramer said "GOP's Cantor, Looking Past Politics of Debt", on the front page of the New York Times may be the single most important story about the stock market today.

"Here's a piece where a prominent Republican leader has heard the catcalls, chiefly from the big business CEOs who've supported him, that it's time to move on, to be less obstructionist, more reasonable, less about arguing, more about building," Cramer said.

This is the kind of story Cramer has been waiting for.

"It suggests Republicans finally feel the heat from big business and they'll stop hurting our stock market (by refusing to negotiate with Democrats). It's a new development and it's meaningful. This story tells me, 'Jim, take Washington off the front pages for a while, and let the market run. Stop worrying about sequestration and start worrying about which companies are going to do better.'"

------------------------------------------------------------------------
More from Cramer:
Cramer's Game Plan: 12 Stocks to Watch
Are Pullbacks Buying Opportunities
Cramer: This Semiconductor Stock Likely Bottomed
------------------------------------------------------------------------

Cramer also thinks developments in immigration bode well for the market – a story carried by almost every major newspaper, though not on the front page.

"I think that the top in housing was caused, in part, by a crackdown on immigration that required documentation for home buyers. When you lost that stream of hard-working homebuyers without papers, you lost a huge number of customers. There's been lots of talk about what can continue to power homebuilding in this country. I'll tell you what: a pathway to citizenship, as the New York Times says, for 11 million illegal immigrants, precisely the group that had been taken out of the market," said Cramer.

Cramer is also keenly watching developments involving energy. And he likes what he sees. The FT reports that "US gas flaring is visible from space."

On the surface that might seem negative but dig down and Cramer said the takeway is that we are burning more natural gas than ever as we work quickly to become energy self-sufficient.

"The oil and nat gas finds in the US are one of the most bullish catalysts to have emerged in quite some time," said Cramer. "Can you imagine the number of jobs this boom will create down the road?"

Because of these and similar stories buried deep in our nation's papers, Cramer isn't concerned that the superlative headlines ring of the top.

"Read through the headlines," Cramer said. "This isn't the time to play the kneejerk contrarian game. There are too many important developments that make it reasonable to conclude that maybe the market should be taking out the old highs. I think the news is worthy of a gigantic advance, one that's only just beginning."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

Symbol
Price
 
Change
%Change
SPDR SP HB
---

Contact Mad Money

  • Showtimes

    U.S.
    Monday - Friday 6p ET
    Australia
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.