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Cramer: Making Sense of the Market's Madness

Thursday, 11 Feb 2010 | 4:12 PM ET

Here’s the action so far on Thursday as Cramer sees it: The Nasdaq rallied on higher copper prices. Cypress Semiconductor held flat after a great quarter in late January but jumped today after gold did the same. And stocks generated triple-digit gains even though the Treasury’s 30-year bond auction earned only a tepid response from Wall Street.

That’s only a small number of seemingly meaningless cause-and-effect explanations for the day’s moves, where the Dow reached about 100 points into the green after a number of negative trading sessions. Cramer during Stop Trading! said that this kind of rally is “mystifying to most people” because not every investment hinges on the dollar, gold and oil, “but everything is today.”

Stop Trading, Listen to Cramer!
Mad Money host Jim Cramer shares his stock picks with CNBC's Erin Burnett.

“I think what happens is that this is a relief rally that doesn’t make a lot of sense,” Cramer said, especially to “people trading at home.”

Another case in point: Banks, which are cyclical plays dependent on a strong economy, are not up today despite an overall better economic picture and better housing numbers.

Also, people are saying that a stronger-than-expected situation in China is helping stocks today as well. But the country’s New Year is approaching, Cramer said, so we don’t know what kind of a slowdown will take place as a result. In fact, he recommended Wynn Resorts on the assumption that many Chinese will head to Macau for vacation during the annual celebration.

So what’s the real problem here?

“We’re reacting to too few stimuli and not enough of the actual earnings,” Cramer said.

Copper can’t boost the Nasdaq. Gold can’t catalyze Cypress Semi . So it’s no surprise that these moves might confuse investors.

“The daily moves are so exacerbated by these commodity plays, Cramer said, “that we literally find ourselves totally at sea in this market.”

“It’s just making very little sense,” he said, whether on an up or down day in the markets.

He tried to steer viewers away from commodities entirely, telling them to consider buying SCANA in the wake of FirstEnergy’s takeover bid for Allegheny Energy. In addition to the potential for another M&A deal in the group, he said the stocks have come down a lot recently and SCANA offers a 5% dividend yield.

Lastly, Cramer recommended Sears Holdings , saying he likes the company’s move to license DieHard power tools. Analysts have been calling for this for some time, but Wall Street seemed to yawn at this announcement. Regardless, Cramer said that he thinks Craftsman could be next and that he likes SHLD as a housing play.

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