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Cramer Predicts Market Pullback

Wednesday, 12 Aug 2009 | 8:42 PM ET

Prepare for a possible correction, Cramer told viewers Wednesday, because investor sentiment is too bullish. He predicted a “shallow” pullback of 1.5% to 3% from the markets’ present levels.

Full Speed Ahead?
Insight on the day's rally, with Mad Money host Jim Cramer.

Maybe the Mad Money host was being too bearish, though. After all, the Dow did finish the day 120 points higher, while Nasdaq climbed 29 points. Then again, these moves followed losses on Tuesday. And there was Starwood Property Trust’s dud of an IPO.

But didn’t the insurers run after the Allstate upgrade? What about the $20 billion that mutual fund Alliance Bernstein took in last month? Surely that won’t sit on the sidelines. And unlike Starwood, Emdeon’s IPO was a success. EM shares rose as high as $18.24 in midday trading from a $15.50 offering price, and the stock closed at $16.52, or 6.58% higher.

What’s really going on? Cramer stuck with his call for a small correction, but attributed Wednesday’s market rebound to a trend he’s talked about a lot recently. No, not mobile Internet, but rather desperate money managers buying any stocks they can get their hands on.

These are the hedge and mutual funds who stayed in cash too long and now are scrambling to build stock positions. Failure to keep pace with the market’s rapid increase since early March means that clients will soon withdraw their money. And that would cost the fund managers their jobs. (Read more about “The Money Manager’s Dilemma.”)

“The big boys stepped away from buying a couple of days,” Cramer said, “hoping the market would come down so they could catch up in performance. When it didn’t go down again at the opening, they collectively panicked,” and went on a buying spree.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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