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Prepare for an EU-Inspired Rally?

Short sellers with heavy bets on the tumult in Europe should be careful, Cramer warned during Thursday’s Stop Trading!. Whether the European Union collapses or not, any resolution at all could be enough to send American stocks higher.

“I fear that if you’re short you’re going to run into a buzz saw,” Cramer said.

If the German Parliament approves the joint EU-International Monetary Fund $1 billion bailout out (and a vote is expected Friday), “We’ve got some cushion,” Cramer said. But even if they don’t, the outcome, however negative, would still remove the sword of Damocles hanging over the markets. With the situation resolved, investors may return to buying stocks.

The impending passage of US financial-regulation reform is another factor that has weighed on stocks but will soon ease, Cramer said, giving investors room to breathe and putting pressure on the shorts.

Cramer wasn’t making a broad buy call on all stocks, but he did recommend picking and choosing among high-yielding dividend plays like Statoil , a 5% yielder in a growth oil business. These stocks offer better returns than Treasurys, he said, they offer a better strategy than keeping your portfolio in cash, and they could rally on news of any resolution.

Investors might even want to consider “one or two” technology stocks, Cramer said, because they’re trading as if Europe were the only place their products were sold.

Cramer also recommended call options as a way to lessen downside risk, if you like the market as he does.

Switching back to Europe, Cramer noted that in German currency, that country is down less than the US, which “seems wrong to me.”

“Germany’s far more at risk than we are,” he said, adding, “There’s so much that is happening in our country that’s better.”

Cramer was emphatic about his intentions to not downplay the trouble in Europe, saying the Continent’s debt woes are the reason behind his “very conservative strategy” of buying dividend stocks. But he was leaving room for the possibility that things there could change suddenly – say, if the European Central Bank pushes through a quantitative easing while the German Parliament gives its OK to the bailout package. That would alter the investing environment significantly.

“We could get a resolution that causes a rally,” Cramer said, “and that you might want to sell into that rally.”

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