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7 Wrong Reasons Why We Sold Off?

Tuesday, 16 Nov 2010 | 6:53 PM ET
When Bears Attack
Cramer helps you put together the pieces of today's sell-off.

As stocks closed substantially lower Tuesday, the bears played out a “vicious excuse-a-thon,” Cramer said, that he was quick to dismiss.

The market sold off because people were taking profits, explained the “Mad Money” host. It’s also options expiration on Friday and stocks tend to sell off before hand. Yet the bears took neither of these “commonsensical” reasons into consideration, he complained. Instead, they offered these tired seven points for the market’s move downward:

First, the market fell because Federal Reserve Chairman Ben Bernanke continues to press forward with quantitative easing. In other words, the bears don’t think his plan to purchase $600 billion in Treasury securities will bolster the US economy.

Second, in light of European debt concerns, people are buying the US dollar over the euro. With a higher dollar, foreign countries are less likely to buy US goods. Cramer thinks we should have known people would buy the dollar on European weakness.

Three, oil is crumbling. Funny, it’s run $25 straight. And forget about the fact that $100 crude, which it where it seemed to be headed, would be a disaster for the American consumer. Even more important is the Chinese consumer, Cramer said. We need the Chinese to continue using lots of raw materials. When copper is down and the Baltic Freight Index is falling, that’s more important than how much a gallon of gas is going for in the US.

Four, the last 1,000 points of this rally was one big short squeeze. The gains were caused by those betting against the market, who panicked at the top and aren’t short anymore. Now with all the shorts gone, the bulls have no one left to sell to, and that has sapped all the fuel from this rally. Or so the negativists say.

Five, the markets pushed lower because President Obama isn’t going to extend any tax cuts. As a result, a double-dip recession is more likely.

Six, the sudden spike in interest rates will kill the housing recovery. Higher rates are going to make dividends look small, the so-called common wisdom goes. But the way Cramer sees it, rates have to back up another 100 basis points before they even come close to being competitive.

Seven, the bears sold off because they knew the party ended long ago. They simply knew when to get out.

Of course, Cramer believes none of these excuses. Instead, he thinks the market fell for a few different reasons.

First, he’s always recommended taking profits where you can. Can he blame investors for following through on his advice? Second, companies that recently reported good quarters also sold off, but the few companies that had positive earnings results out Tuesday ended higher, including Urban Outfitters , Walmart and Home Depot . It was as if those other reports had already been forgotten. So perhaps such a pullback provides a unique buying opportunity. Lastly, he thinks this was merely a correction of up to 5 percent, and an inevitable one at that.

“If we exceed my 5 percent target, start focusing on companies with big dividends where the yields are growing because the stocks are getting hit,” Cramer said. “Many stocks with great earnings do get more valuable as they go down.”

When this story published, Cramer's charitable trust owned Home Depot.

Call Cramer: 1-800-743-CNBC

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