Stocks slumped Friday after seven-straight days of gains, but Cramer isn't worried.
"For most stocks we simply gave up a lot of the gains we made during the seven day up sojourn," he said. "For most stocks the damage was slight, except for those perceived as truly disappointing, such as Bank of America and Google ."
It is his contention, however, that Google's performance was not that bad. Cramer is not a fan of Google though because he thinks it can't compete with Apple and said the company is spending too much with little prospect of doing business with China down the line.
At any rate, he thinks the market is a collection of stocks that trade in lock stop. On Thursday, he explained, the Dow was down 120 points and the S&P was 1.2% lower at one point. Then, investors learned Goldman Sachs might be settling with the government, that BP might be plugging it's leaking well and that US financial regulatory reform would soon become law.
"The people who trade the basket of stocks that is the S&P were dumping that basket," Cramer said. "Suddenly as the good news came out, they frantically started buying it back until the index moved to the black."
The market, Cramer said, will trade higher and then come down again. He thinks that's simply what happened. Some argue that unless a company shows good revenue growth, it gets hit. But Cramer said that doesn't hold true, as both Intel and PPG recently reported such growth and no one noticed. Both companies went down with the rest of the market. So the market was so overbought, he said, stocks couldn't realistically continue to climb. Every stock, he noted, regardless of earnings went down in lockstep.
Looking forward to next week, Cramer thinks the soft goods stocks—drugs and foods—will start to rally. Until that happens, however, he recommends sitting out this market.
"You need to exercise extreme caution after a run like we've had because even the slightest bit of bad news can trigger a landslide," he said. "The simple fact is things are better, not worse, than they were three weeks ago. We just made too much money too fast, faster than the facts warranted. Now we pull back and wait."
Cramer's charitable trust owns Bank of America, Intel and Apple.
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