After last week's stock market rally, all three major averages closed in the red on Monday following news that Cyprus plans to partly pay for a multi-billion bailout by taxing bank depositors, but Jim Cramer still doesn't recommend buying most stocks now.
To make his case, the "Mad Money" host pointed to the technicals.
Lately, the biggest gainers include the banks and insurers, which seem to be gaining steam on account of higher interest rates, Cramer noted. In turn, he thinks interest rates will continue to push higher because insurance companies and financial institutions do better when rates are rising. With rising rates, insurers find their investment portfolios generate a better return, so they don't need to make all of their money on premiums alone. Banks do better with higher rates because it allows them to loan more money. As business gets better, the transports should also push higher, Cramer said.
The charts of the companies that do best in a recession, however, appear likely to roll over on account of the prospect of higher rates. Take consumer products makers Colgate, Clorox and Kimberly-Clark, for example, as well as food companies Pepsi and McDonald's. To Cramer, all of these stocks are a sell if business improves because when they report, they're not likely to have as good a year-over-year comparison as the banks, insurers or transports.
Cramer recommended investors look ahead to Wednesday, when the U.S. Federal Reserve meets to discuss interest rates.
"I would not be so concerned about this whole scenario if it weren't for the fed meeting this Wednesday," Cramer said. "I am concerned that if I see the strength in the economy and I see the stocks of companies that benefit from higher rates going up and the ones that get hurt by higher rates getting hammered then the fed might, too."
Read on for Cyprus Gives the Fed More Reason to Buy Bonds
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