GO
Loading...

What's Going on Behind the Averages?

As the Dow Jones industrial average gained 102 points to close on Wednesday at its highest level since late August, Cramer thought it necessary to explain what's going on behind the averages.

To start, Cramer noted the bears are digging in their heels despite recent positive action. According to polling by Investor's Intelligence, there are as many bears now as there were at the generational low of Dow 6,500 in March 2009. The bears have been worried about Europe's debt crisis, which leaders have been unable to control so far.

"But have the bears considered what happens if the world gets better away from Europe?" Cramer said. "Have they considered that the biggest negative out there, that Germany and France might have their sovereign debt downgraded if they nationalize their failing banks, may not even be all that negative?"

After all, Cramer noted theU.S.'s credit rating was downgraded. In turn, the only thing that happened was it suffered a little embarrassment, but then saw interest rates go down.

Meanwhile, U.S. companies' earnings reports are benefiting from the downbeat environment. For weeks, analysts had been cutting estimates for Pepsico , for example. So when the soft drink maker reported its quarterly numbers Thursday, it easily beat the lowered bar and the stock rallied. Those who shorted the stock were on the losing side of that trade.

Bottom line: Cramer doesn't think we're home free and he shares the trepidation about Europe. But he also thinks a lot of short-sellers have thrown in the towel. The bear case is taking a hit, he continued, and there may be too many bears out there worrying about the same thing for it to become a reality.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

Contact Mad Money

  • Showtimes

    U.S.
    Monday - Friday 6p ET
    Australia
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.

Mad Money Moments