Cramer’s Game Plan: Watch Out for Weakness
If earnings are largely driving the latest leg of the rally, then next week is going to be very telling.
"We've had a remarkable run, but it's been done in an environment where expectations were lower going into the quarters," Cramer explained. "That's no longer the case."
Considering a slew of potentially market moving reports are scheduled for the week ahead, Cramer thinks investors should proceed cautiously. "I would be very careful of some stocks until expectations are reduced or the stocks come down in price from these levels," he said.
Following are the earnings reports and other events that Jim Cramer will be monitoring in the week ahead.
MONDAY MAY 20
Consumer staples will land front and center on Monday when Campbell Soup reports. "I normally don't care all that much about this household brand but the consumer packaged goods segment is hot right now so this time around I intend to pay attention," Cramer said. "What Campbell reports could spur the next move in the entire group."
In addition, Cramer will have IPOs on the brain with 3 offerings getting his attention. "There's Channel Advisor, an e-commerce software company that allows retailers to present wares on multiple on line channels," he said. "There also Ply Gem, a company that manufactures exteriors for residential construction and there's Sprouts Farmers Marker, which runs 150 natural and organic groceries." All, he said, warrant your time and attention.
TUESDAY MAY 21
Retail will be the watchword on Tuesday with a slew of stores releasing their results. "First up will be Best Buy," he said. "I don't want to own it going into the quarter because when Wal-Mart reported they said home entertainment had been a weak area of business." To make the stock all the more troublesome, Cramer believes recent gains are due to a short squeeze. "And I think by now most of the shorts have been cleaned out."
From electronics Cramer will turn his attention to home improvement as Home Depot reports. "My charitable trust sold out of HD this week," Cramer revealed. Although he believes in the fundamentals, "we felt the expectations had gotten too elevated. The stock has already run 24% this year."
Next Cramer will be parsing through results from TJX. "My charitable trust also rang the register on TJX," Cramer admitted. "We felt that the disappointing results in JW Nordstrom's could portend weakness in TJX, too. The retailers have simply run too much for my taste at this moment."
Then it's onto Autozone. "Here's one that I love to play after it reports because the stock typically gets hammered on the quarter and then we hear about how things are actually better than expected in the auto-after parts business."
Also there could be a little drama as NetApp reports,"The data storage company is currently the subject of hedge fund activism. Elliott management wants a new team to run the company," Cramer said one that can unlock shareholder value.
Read More from Mad Money with Jim Cramer
Cramer's Antidote for Market Froth
Market Facing Cruel Summer?
Don't Fall for Whale Watching Nonsense!
WEDNESDAY MAY 22
The PC business also comes into focus as Hewlett-Packard reports earnings. "Many people are thinking that Meg Whitman can turn the company around. I hope that's the case but I wouldn't stick around."
Housing will come back onto the radar as Toll Brothers reports. "The stock is riding high into the quarter so I don't want to own it," Cramer said. "And that's despite the fact that it's a tremendous homebuider and I am a huge bull on housing."
THURSDAY MAY 23
Also Sears will report. "This one has very low expectations and it also has a huge correlation to housing, a theme that I believe in. That's a good combination," Cramer said.
From there Cramer will turn attention to the cloud with results from Salesforce.com. "I consider this company among the best of the best of the high growth cloud plays out there. I think you should own the stock going into the quarter."
After that it's onto results from Williams Sonoma. "I think the business is strong but only if the stock is down more than it is now would I buy."
FRIDAY MAY 24
On Friday Cramer will again be taking the temperature on retail - this time specialty retail. Abercrombie & Fitch will release results but Cramer isn't excited. "Expectations are too high, I can't sanction owning ANF into the quarter."
Also Foot Looker reports. "Footlocker will most likely have a strong quarter but it's sitting pennies from its fifty-two week high. I wouldn't chase it."
Call Cramer: 1-800-743-CNBC
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the "Mad Money" website? email@example.com