Think like Cramer: Analyzing the market rally

With Thursday's market rally, there is plenty of speculation floating around as to what caused the market to soar.

Jim Cramer warned that it is easy to use broad data to explain the rally, such as low jobless claims or positive data from China and Europe. Why not? It's spoon-fed information and sounds really snazzy. Plus, you don't have to do as much research—bingo!

However, in order to unlock real profits and understand what is truly behind a day like Thursday, Cramer takes a different standpoint. His view stems from an event-driven position. Meaning, now that his checklist has been completed and the market is once again investable, performance is based on company earnings reports and what is happening right now.

From that perspective, the market fell Wednesday because of oil dropping and shootings in Ottawa. Those two events didn't repeat on Thursday, leaving the free market to go higher.

Further diving into the mind of Cramer, he shared with his audience his three steps of how he figures out what is really behind a market rally.

First, figure out what is going up. Second, figure out why it is going up. Third, figure out its impact on the general market.

"What matters most in the case of the bears and the bulls, is the small unit combat that really decides the battles—the individual stocks," he said.

The "Mad Money" host has a list of 10 stocks that he thinks duked out the battle of the bears and bulls and led to Thursday's rally.

Jim Cramer on set of Mad Money

Highlights include:

American Airlines: Released an extraordinary report. A week ago the stock was knocking at death's door at $28, and today it is at $39.

Caterpillar: This stock was down huge ahead of its report, and when the company reported, it was a huge upside surprise. "If CAT can do this kind of number when things are bad, what number can it print when things are good?"

3M: A lot of people expected numbers to tank because of its heavy exposure to foreign markets. However, it reported a picture perfect number, which relieved concerns of a strong dollar.

A trader works on the floor of the New York Stock Exchange.
Getty Images
A trader works on the floor of the New York Stock Exchange.

Union Pacific: "I have loved this company for so long that I have come to take its amazing earnings for granted," said Cramer. He was truly shocked at the numbers reported, and said this stock is on fire.

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Cramer added that there are plenty more stocks like Alibaba and Yahoo that he could have added to this list. However, at the end of the day the rally came from simple numbers.

"Blame the Fed? How about blame corporate America for doing so well."

Call Cramer: 1-800-743-CNBC

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