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Tech, Industrials Return to Prominence

“Major and minor chords, they’re what this market is all about,” Cramer said Thursday. “We’re constantly trying to figure out which trend is the major chord that can be bought on weakness, and which one is the minor chord, which should be sold into strength.”

So what are the major chords of this market, and what are the minor? Well, the majors have been the producers of raw materials, the fertilizers and the industrials. Companies like Potash , Caterpillar and Eaton selling into emerging markets that are desperate for food and machinery. There’s also cutting-edge technology in this group, or the companies that help drive the Internet, mobile Web or cloud computing. Thinks F5 Networks , VMware and Netflix .

The minors, meanwhile, are led by consumer-products companies, health-care outfits and other stocks that serve as a defense for investors when the economy’s slow.

What’s interesting, though, is that in this run up to Dow 12,000, it’s the minors and not the majors that have fueled the move. Analysts, investors, the Street—lots of them got skittish when this season’s earnings reports started to roll in, and they sold the Parker Hannifins and Alcoas , the F5s and the VMwares, as well as many of the oil stocks, the major chords in general, because they assumed these companies just didn’t perform as well as they should have.

“But today all of it changed,” Cramer said. “Today we switched themes.”

Turns out consumer-good names like Procter & Gamble and Colgate-Palmolive are under serious margin pressure as commodity prices rise. This caused a sell-off in both stocks. But also, the switch occurred because the major chords never should have been sold in the first place. And the great numbers we got today from Caterpillar, Eaton and Potash proved it.

And don’t forget the monster quarterNetflix reported on Wednesday evening. The stock wouldn’t have soared $27 today if this company wasn’t hitting its numbers and then some. Cramer likes this one as a tie-in to his mobile Web theme, as Netflix now measures the size of its addressable markets by cell phone rather than household. Another fun fact: Netflix now accounts for 20 percent of all Internet traffic in the evenings.

Then there’s Qualcomm , another mobile Internet play. QCOM, which controls the intellectual property that makes 3G and 4G wireless possible, also reported stellar numbers last night. And Cirrus Logic , seller of sound cards to companies like Apple , finished Thursday 18 percent higher after its own blowout quarter this morning. When you factor in the positive commentary from Verizon about smartphone growth, you know why this group is a major chord in this market.

Cramer’s bullish on cloud computing, too. That and these mobile Internet names are “ready to roar again,” he said. And F5, Salesforce.com and VMware, all pulling back lately, “should be bought and bought aggressively now.”

The bottom line here is that the minors have been given their cue to fade into the background and let the majors take up the lead.

“They did their job in getting us higher, but now it’s back to business with the real drivers of this market,” Cramer said, “the generals of industry and technology, to take us higher and higher still from these levels, which are thought to be exalted, but are still more than 10 percent below where I think we’re headed in 2011.”

When this story published, Cramer’s charitable trust owned Alcoa, Apple and Caterpillar.

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