A rally is a rally, and in the end, we got one Monday, regardless of it being led by the "wrong stocks" and his fear of the "limbo stick," Cramer said.
But which companies?
What really matters, Cramer said, is that until we see disappointing earnings, his instincts are to buy, not sell this market. Particularly when it comes to companies with great earnings, like Citigroup , which delivered a "monster good quarter, one that should take Citi beyond $5 and change, a level that has repelled the stock repeatedly. We've been behind Citigroup since it did that underwriting at $3.15, and we are reiterating that stance despite the 7 percent move today." It's outsized, he said, but not enough as it is still below where it traded last week.
But are we out of the woods? Cramer thinks it's still not clear. "As much as we liked the rally today, the wrong stocks led it," he said.
What are the wrong stocks?
- Johnson and Johnson
- Procter & Gamble
These stocks represent "the recession-proof names that you reach for when you think economies around the world are going to stall," Cramer explained. "When these stocks go up it reveals that buyers are more concerned about a slowdown than a global economic acceleration."
Consider these bits of anecdotal evidence: we got an extremely negative piece in the Wall Street Journal about Verizon's ability to pay its dividend. How did Verizon do? It rallied.
Eli Lilly announced disappointing earnings and an estimate cut and what did the stock do? It rallied.
The New York Times reported recently on what a beating the health maintenance organizations took in New York when they had to provide coverage to people with pre-existing conditions. How did the HMOs do? They all rallied.
"How can this happen? Because when the rotation into the wrong stocks hits, it takes up the most consistent operations, operations like Wal-Mart, which has been a total bow-wow throughout the rally because it is too consistent. People want the Nordstrom's and the Coaches . So we're concerned about too many of the wrong stocks going higher today, and too many of the right stocks, like tech and machinery and steel, gave up nice gains from last week.
It's the earnings limbo effect, Cramer said.
Earnings got off to a weak start last week with Alcoa , but then one after another, reports were progressively better, slowly moving up the bar:
- Intel said PCs were smoking
- CSX said coal, autos, steel, grains were busting out
- Yum calls a turn in consumer spending with Pizza Hut and KFC
- JPMorgan shoots the lights out, moving the limbo stick to Olympic levels, Cramer said.
"The market shrugged off government intervention, decided that the economy's not falling off a cliff, and that a pair of golden slacks can't derail buyers. Even if the buyers flocked to just enough of the wrong stocks to propel the averages higher," Cramer said.
"Here's the bottom line: a rally is a rally, and in the end, we got one. Regardless of the wrong stocks. Regardless of the limbo stick, we are going to keep liking this market until the earnings tell us not to, and that hasn't happened yet. Which means we are a buyer on the weakness caused by a pair of pants ripped by the government and, unlike Goldman, we will continue to regard this market innocent until the earnings prove us guilty."
Cramer's charitable trust owns Goldman Sachs and Intel.
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