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Cramer’s Checklist: 6 Bull Reversal ‘Tells’

Friday, 7 Jun 2013 | 6:53 PM ET
No Huddle Offense: Market Straightening Up?
Friday, 7 Jun 2013 | 6:58 PM ET
Mad Money host Jim Cramer shares his final thoughts of the day.

(Click for video linked to a searchable transcript of this Mad Money segment)

On Friday, the Dow Jones Industrial Average shot up more than 200 points, scoring its best day since Jan. 2, and the S&P 500 ended a two-week losing streak.

Advancers outpaced decliners on the NYSE by a ratio of about 7 to 3, while on the Nasdaq, nearly two stocks rose for every one that fell.

Is the market back on its feet?

According to Jim Cramer, the way to tell is to monitor 6 influences in the market. When they all favor the bulls, the rally should have legs.

1. Interest Rates: "They either need to stabilize or go up at a much slower pace," Cramer said. In late May yields on 10-year Treasurys spiked to 2.2%—about a 13-month high. The Mad Money host believes a large degree of weakness in the market stems from resulting fears about how the sharp increase will ripple in the market.

2. Europe: "The market needs to feel as if Europe is getting stronger," explained the Mad Money host. And Cramer thinks that may already be starting to happen. Germany's central bank on Friday said a rise in exports may be a sign that its economy is starting to percolate. They also suggested it could lead to robust economic expansion in 2014.

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3. China: "We need some stabilization out of China," Cramer added. The Mad Money host believes a turn in Europe could drive this catalyst because Europe is among China's largest trade partners.

4. Retail: "Fourth we have to get a sign that retail is improving," Cramer said. "We got some hope on Thursday when Gap reported stronger than expected same store sales. The market hears from PVH next week, an apparel company that's in every major department store. It could provide continued momentum with a good report."

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Read More from Mad Money with Jim Cramer
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Cramer: Weakness Has Silver Lining
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5. Commodities: "We need to see some stability in commodities to confirm economic data that suggests the global recovery is improving," Cramer said. Typically the Mad Money host looks to iron ore, copper, aluminum and lumber as mileposts. So far he's only see positive price action in lumber.

6. Leadership: Cramer is looking for the stocks of companies that benefit from an improving economy to lead the market. "That ranges from aerospace, transports and tech to banks and biotechs," Cramer said.

"I think we need all six to go right before the market can rally to new all-time highs," Cramer speculated. "Currently I'd say only four out of six favor the bulls."

Nonetheless, four out of six shouldn't be dismissed. Cramer is optimistic. "To me it suggests that the worst is over."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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

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