The Dow on Wednesday broke through its 2010 peak of 10,725, closing eight points higher to mark its seventh straight positive close. The S&P 500 meanwhile registered an even better run, finishing up for the 14th straight day. Given this, some analysts might say the markets are too hot, but Cramer thinks they’re exactly where they should be.
How does he know? By using 10 tests to gauge the health of stocks.
It’s true that investors want to wait for share prices to pull back before they buy, and there’s no doubt that events will unfold, however negative, to cause that decline. But Cramer thinks this market overall is robust and strong. Here are his 10 key tells:
1. The transports are rallying. When this happens, it means that businesses are shipping goods, which in turn signals an uptick in economic activity. As a result, Cramer said, profits shouldn’t be too far behind.
2. The bank index is moving higher. A major exchange-traded fund, the Financial Select Sector SPDR , also hit a new high today. And like the transports, this should indicate an improvement in the economy. That’s because credit drives business, and the XLF’s upward trajectory means the credit situation is improving, i.e., there are fewer defaults and increased demand.
3. The market is responding to brokerage upgrades. In an unhealthy market, Cramer said, no one cares about an upgrade. But a strong Dow and S&P give rise to the kinds of moves we saw today in Lincoln National , which got a thumbs-up from Bank of America Merrill Lynch. LNC closed the session with a 4.4% gain.
4. Technology is always a great leader, and these stocks are roaring ahead. Apple , Oracle , Intel , Microsoft – all the bellwether names are on fire. Cramer said the driving themes of smartphones, faster internet and cloud computing should continue to carry the sector – and the market.