Last year the bull market was roaring, especially in technology. And the best play was to brush off the negativity and buy. But, it’s a whole new year and that calls for a new approach. Cramer said change is in the air as the big money institutional managers are behaving differently.
Cramer goes Off The Charts with Ken Shreve, who writes the Market Movers Newsletter for The Street.com.
The daily chart of the Nasdaq Composite is the most common stand-in for all things tech. Shreve sees signs that big money managers have gone from buyers to sellers by looking at the higher-volume declines in the Nasdaq followed by lower volume gains. Shreve said this is a sure sign that demand is drying up.
What investors can also see in the chart is that even before the huge sell-offs on Thursday and Friday, there was much more selling on high volume. This is another clear sign to Shreve that the big institutional managers are quietly jumping ship.
How did these big money managers see this coming? Possibly the same way Shreve did, Cramer said. Take a look at the daily chart for Amazon.com . According to Shreve, the market-leading growth stocks, "generals" as Cramer refers to them, usually start to crack before the indices like the Nasdaq does. Amazon fell through its 50-day moving average, a short-term measure of its trajectory at about the same time that the money managers selling began in the Nasdaq as a whole. Cramer said this was not long before last week’s huge breakdown.
Is it too early for investors to start trying to catch stocks on sale here? Yes, Shreve said. The professional selling needs to run its course before it's safe, then investors should wait to see new signs of institutional buying. This buying would look like rallies on higher volume with lower volume declines.
Cramer is on the fence about this one. The charts are saying investors should watch out and recognize that things have changed, and money is coming out of the Nasdaq despite the turn in fortunes for stocks. Cramer remains convinced that Apple, Intel and many other Nasdaq stocks are just too cheap to sell. That said, Cramer would heed Shreve’s analysis. Therefore, investors who want to buy should start smaller and leave room to buy bigger scales on the way down. And if investors want to sell something, sell it more aggressively to start and with a tighter scale.
What about dip buying? “It is likely that the dips will be steeper, like last week’s cascade,” Cramer said. “It is imperative that investors don’t buy all at once.”
The bottom line: the trend for Cramer right now is not to be bullish about American stocks like he was in 2009 until things change. Investors have to get more conservative going forward.
Cramer is the Chairman of TheStreet.com.
Call Cramer: 1-800-743-CNBC
Questions for Cramer?
Questions, comments, suggestions for the Mad Money website? email@example.com