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Jun.22
6:35 PM ET
Monday, 22 Jun 2009
Cramer: Is a Rebound Rally Imminent?

The media is always trying to explain the market’s actions. Even if they don’t know for sure, they feel compelled to attribute cause. So when the Dow loses 201 points and the S&P 500 drops 28, as they did on Monday, investors get a number of different reasons for the move.

Today The New York Times pointed to “resurgent fears about the struggling economy,” while The Associated Press blamed “global economic worries.” Hey, maybe declining crude prices were the culprit. That sounds legit, doesn’t it?

The truth is that all of these reasons are wrong, Cramer said. Investors took the market down because of pricing. Stocks had gotten too expensive, with no fundamental basis for the move, so we sold off.

Interestingly, though, something very similar happened last month, at least in terms of the sell-off itself. In May, the market saw a five-day streak of losses in a six-day period, only to be followed by a four-day rally. Investors who got in at the bottom earned 5%. Cramer thinks that history may repeat itself, especially as the end of the quarter approaches and mutual funds look for top-performing stocks to boost their numbers.

Where will they look? Probably the S&P 500’s top-ten list. Cramer likes Huntington Bancshares [HBAN  Loading...      ()   ], down 9.5% but still holding above its latest secondary offering price, and Lincoln National [LNC  Loading...      ()   ], which just raised a significant amount of cash through stock and bond issuance, taking the risk of bankruptcy off the table.



Apple [AAPL  Loading...      ()   ] also would make a good buy at these levels, he said.

While it’s true that history doesn’t always repeat itself, and there’s no guarantee that last month’s snapback rally will return, Cramer said that these kinds of sell-offs tend to recharge the market. And that’s just what he’s expecting.














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