Concerned, Cramer Says Buyers Should Pause
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Every day Jim Cramer weighs the reasons to buy against the reasons to exercise caution. And right now, he thinks caution should prevail.
"In the last 24 hours the weight of the evidence has shifted to the negative," said Cramer. "And unless we get some big breaks here, these negatives will begin to be reflected in the averages beyond where they are right now."
In other words, Cramer is concerned that negative headwinds are developing that could drag stocks lower.
"I have a laundry list of worries which have surfaced in the last week that are worth keeping in the mix because they could shift the preponderance of evidence further into the bear camp than I would like to see," Cramer said.
Worry #1 - Europe
Although Cramer has been clear that he doesn't think Cyprus is nearly as serious as the collapse of Lehman, he also believes in the near-term developments could be very damaging.
"That means we might have a sell-off tomorrow or Monday, either because traders don't want to go into the weekend long a lot of stocks, because Europe might screw it up, or because on Monday we get the denouement of the banking crisis and it ain't pretty," he said.
Cramer again reiterated that long-term Cyprus won't matter to the US stock market but short-term it could bring out sellers.
Worry #2 - Sequestration Ripple
Although the House approved a stopgap spending bill on Thursday to avoid an all-out government shutdown, the measure keeps in place $85 billion in automatic spending cuts, known as the sequester.
"I expect that next week the President will most likely use his podium to talk about how horrible sequestration will be. Perhaps the excellent jobless number we got this morning will be the last one if it's as bad as Obama says. We know the local and state governments are cutting back, too. Not positive," said Cramer.
Worry #3 – Earnings Disappointments
Lately, a few key earnings reports suggest to Cramer that the recovery may not be as robust as hoped.
"Federal Express blew up—it was not a good number—it says to me world trade is soft," Cramer explained. "Caterpillar's retail sales number might not translate into weak earnings, but I don't like surprises. I was prepared for CAT's sales to be up, not down double digits. And then we got Oracle. It was a miserable report."
All told, Cramer said he feel compelled to conclude that the macro environment has gotten worse than previously thought.
And as a result he think the prudent move is to proceed cautiously.
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That's not to say Cramer is turning into a doomsayer. He's not. He continues to see plenty of positive themes in the economy and he believes they should ultimately drive stocks higher.
It's just in the near-term the catalysts listed above could generate selling, and make the path of least resistance lower.
"I just see all of this as a referendum on not trying to capture any more upside right now," Cramer said. "Either the uncertainty will lift or prices will get lower – then we'll make our next move."
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