Think about it: Congress has been obsessed with the wrong issues as far back as early winter, when the much-needed stimulus focused on state and city handouts and not job creation. Today’s 30-year bond auction showed that the deficit, which has been big for years, could be funded at very low interest rates. And retailers are doing far better than anyone would have expected so soon after the crash.
Also, copper and oil have merely paused, following their big runs. They don’t signal an economic slowdown. (Forget about the fact that the Baltic Freight Index, a great measure of the world economy, was up big on Wednesday night.) As for housing, that industry has bottomed, Cramer said, and the worst markets – Florida, California, Arizona and Nevada – have been stable for months. Toll Brothers verified the market’s high end just yesterday.
So what really happened?
“For the last six days … the market marched higher and higher and higher on essentially no news,” Cramer said. “We came up too much too fast. It happens. So we’re due for a pullback like the one we just had.”
Cramer uses the Standard & Poor’s Short-Range Oscillator to gauge these periods of overbuying and overselling. Under normal market conditions, the Oscillator reads minus five when investors are furiously dumping shares, which indicates that buyers are about to flood in. The opposite is also usually true. A reading of plus five shows that too much buying is taking place and pullback is almost inevitable.
There really wasn’t any news worthy of today’s losses. Jobless claims showed improvement, Walmart’s earnings were strong, though oil was down. As Cramer said, “Two out of three ain’t bad.” He saw no reasons for investors to be scared, telling viewers that today’s action was just a normal market at work. In fact, they probably should have taken some profits themselves.
“It would be irrational not to sell something,” Cramer said.
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