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Aug.18

6:24 PM ET

Tuesday, 18 Aug 2009

Cramer: Is the Correction Over?

Posted By:Tom Brennan

Sectors:Technology | Automobiles and Parts | Health Care | Retail

Cramer was right about the most recent sell-off: He said it would be shallow, and it was. Note the Dow’s 83-point rally on Tuesday after a brief 3% dip as vindication of his call.

The bears must be stunned and confused – flummoxed even. Just yesterday they could have pointed to what seemed like a long list of negatives for the market: a weakened consumer, no back-to-school season for retailers, tech’s stalling out, China’s disappearance, credit-card defaults, cash for clunkers cannibalizing what little money people had to spend on other items and cars in the future, and President Obama’s plans to “socialize” medicine.

Today? Target [TGT Loading... () ] and Home Depot [HD Loading... () ] joined Kohl’s [KSS Loading... () ] and Walmart [WMT Loading... () ] to say that sales and profits are getting bigger. Walmart and Target, “the two biggest back-to-school stores in the country,” as Cramer called them, both said they were encouraged by this season.

Then there’s tech. Apple [AAPL Loading... () ] closed $4 higher on Tuesday, as the iPhone seemed to grow in dominance in Canada, Europe and Japan. And the revolutionary handset hasn’t even reached China yet. Cramer also mentioned the good quarter that Hewlett-Packard [HPQ Loading... () ] reported after the bell.

Also, China has reemerged, the market closed higher, and oil rebounded to $70 a barrel. Cramer said he thought the Middle Kingdom was pickling, or haggling for raw goods, and that’s why it seemed to disappear. The country carries so much weight that it can scare commodity producers – the Potashes [POT Loading... () ], Freeport-McMoRans [FCX Loading... () ] and BHP Billitons [BHP Loading... () ] of the world – into lowering prices. The same strategy worked back in 1957 when China strong-armed a better deal out of rubber producers in Malaysia and traders in Singapore.

FOR INVESTORS

The last three cornerstones of the bear thesis have fallen apart, too. Citigroup [C Loading... () ] and American Express [AXP Loading... () ] announced that credit-card defaults are going down. GM is putting more people to work building cars, and Ford’s [F Loading... () ] raising production for 2009, neither of which would happen if cash for clunkers wasn't working as intended. And the public-option insurance plan that Obama wanted seems to be off the bargaining table. That’s good news for Unitedhealth [UNH Loading... () ], Aetna [AET Loading... () ], Cigna [CI Loading... () ] and Humana [HUM Loading... () ].

These events turned bears back into bulls, Cramer said, and it’s the reason the Dow rallied today.

“Every argument the bears had for selling,” Cramer said, “has been totally rebutted by this great market.”

Cramer’s charitable trust owns Hewlett-Packard and Home Depot.

Call Cramer: 1-800-743-CNBC

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