There's a lot going on next week; although some catalysts could spark a rally, others have the potential to take down the market in a serious way. Really.
"Between Monday's China report and Friday's employment report is something so worrisome that I'd be remiss if I told you I'm not unnerved by it," said Jim Cramer as he talked about the week ahead. "We have eight initial public offerings coming next week and eight more the week after. That's 16 in two weeks! That's just way too much supply."
The "Mad Money" host has been very vocal about this issue. Given the typical surge on the first day of trade, Cramer feels that the valuations of many IPOs are not sustainable in the least. And he believes the issue will become all the more pronounced when additional shares of these newly public companies come onto the market as lock-ups expire.
Cramer believes, ultimately, the phenomenon could lead to a spiral of selling that ends in a stock market disaster.
"This is dangerous people. We are not prepared for all of these deals. I want to be very clear: if this IPO window doesn't close soon, it will take everything down."
Of course, a nasty selloff is not a foregone conclusion. And even if it does happen, Cramer does not think it's imminent. Cramer merely wants you to be aware of the IPO frenzy as a potential long-term catalyst as you sift through the opportunities in the week ahead.
MONDAY MARCH 31
"I keep hearing that when we come in on Monday we're going to hear something big from China," Cramer said.
Street chatter suggests it could be some kind of 'surprise stimulus.' But that doesn't automatically make Cramer a buyer.
Although he thinks a China stimulus package could drive a rally, "Big industrial stocks have already moved so much, that I'm cautious. If there is no stimulus, then the strongest section of the market right now, the industrials, will give up some terrific gains."
TUESDAY APRIL 1
On Tuesday Cramer will be parsing through economic data for signs of recovery.
"On Tuesday we get the US manufacturing purchasing manager's report, construction spending, and car sales. If the economy is improving, then I'd expect all three to be better than expected."
On a related note, Cramer also said, "if car sales are strong then I'm a buyer of CarMax. It's come down sharply from its high of $53 all the way down to $45 because sales had been weak and discounting rife. A strong auto sales number overall could signal that the worst is over."
WEDNESDAY APRIL 2
"Wednesday we hear from a company that's been a consistently terrific performer and I don't think this time will be any different. It's Monsanto. If you want to own this one, may I suggest that you wait until after it reports, as the stock often starts down and then rallies after the conference call," said Cramer.
Also, the "Mad Money" host will be watching the Buffalo Wild Wings analyst meeting on Wednesday. "I can't think of a better time to hold an analyst meeting than right before the Final Four, as Buffalo Wild Wings does a huge amount of business this weekend and next. An analyst meeting could be a true catalyst."
THURSDAY APRIL 3
Micron reports on Thursday and although Cramer expects a solid quarter, he's cautious. "Micron's all about the tight supply of two different kinds of chips, DRAMs and NAND, also known as flash. After a prolonged period where demand has overwhelmed supply, new factories may finally be alleviating the tightness. That, historically has rocked Micron's stock."
Also Cramer will be watching the price action in RPM, a specialty chemical maker as it reports earnings. "I think the business is doing quite well. This stock doesn't have a lot of beta, meaning it doesn't jump in outrageous fashion like some sort of biotech or internet play. But I believe it could resume its climb back to $43 when it reports Thursday morning."
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FRIDAY APRIL 4
If there's a single event next week that moves markets it will come on Friday in the form of the jobs report. "I suspect it will be particularly important for the financials. You see, unlike the industrials, they've been under pressure because interest rates have, bizarrely, been going down. A strong employment number, which, by the way, I'm expecting, can reverse that decline in rates. If we get it, I think you're going to see the financials roar," said Cramer.
If you're looking for a single stock idea, Cramer suggests a long position in Bank of America. "Why? Because not only did it get the nod to buy back stock, but it also cleared up its biggest legal overhang, the government's suit against them for issuing so many faulty mortgages. So if Friday's jobs number is higher than expected, I'd grab some Bank of America right at the opening."
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