Cramer: Tuesday's Market Action Explained

Cramer isn’t sure what “animal spirits” are driving stocks today, he said during Stop Trading!, but he is seeing “signs of really bullish sentiment” in the market.

The Dow was up triple digits on Tuesday, and the S&P 500 climbed 1.28%. Oddly, though, the financials, which make up 14% of the S&P, weren’t leading the charge. Instead, the oils and semiconductors were on the move, with Cramer pointing specifically to Altera in the latter group.

Also, natural-gas stocks were running even though there was no action in the commodity itself. Agriculture seemed to be doing its part, Cramer said, though he was wary of the sector after its leadership during the 2007 rally. The Mad Money host also noted a broad-based rally in the transports.

So what does it mean when all of this cash is pouring into the market, though not the financials?

It’s part of a “money in” trend, Cramer said. Retail investors are “throwing money” at stocks. Mutual funds are buying virtually every sector but the banks. And hedge funds are piling into the market to prove that they’re worth their management fees.

Cramer also pointed out that the consumer is stronger than Wall Street thinks. The pending home sales number was good, and he’s predicting a profitable holiday season, which is more than many analysts right now will grant the retail sector.

Lastly, Cramer said part of Tuesday’s action could be attributed to investors who last week put on short-sale positions after hearing of Dubai’s debt troubles. If that bad news turned out to be a one-off event, then these investors could be “scrambling furiously to cover.” Though Cramer admitted that this wouldn’t explain why the banks had been left out of today’s move.

A previous version of this story stated that an increase in existing-home sales was announced Tuesday when in fact it was an increase in pending home sales.

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