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Cramer: Buffett magic? 10 reasons why we rallied

Cramer: Why we rallied

Just when it seemed that the market was stuck in a nightmare that wouldn't end, the averages finally managed to rally on Monday. And of course, Jim Cramer took a close look at the big moves of the day to put the pieces together as to what triggered the rally.

The "Mad Money" said it all boiled down to exactly 10 reasons.

First, stocks were radically oversold going into Monday's session. When stocks are that low for that long eventually sellers realize that they will destroy stocks if they keep selling them, so the buyers stepped up to the plate.

Second, China was both horrible and amazing. Chinese export data that was released over the weekend was terrible, but then the Chinese market rallied hard, up 4.9 percent. The horribly soft data gave investors the impression that maybe the Chinese government will do more to prop up its economy.

"They think their government's using some of the proceeds from the U.S. Treasurys they have been selling—$200 billion worth—in order to buy stocks to the point where the vicious head and shoulders pattern in the Shanghai Composite can't be broken, don't laugh," Cramer said.

Warren Buffett, chairman of Berkshire Hathaway Inc.
Adam Jeffery | CNBC

Third, Warren Buffett made a massive $37.2 billion acquisition when he purchased Precision Castparts. Cramer was happy that this occurred, as any time Buffett does something bullish he tends to rule the market for a day or two.

"The fact that Precision Castparts is a gigantic industrial and the industrials have been sold willy-nilly in this market should not be lost on people. Buffett clearly thinks the pessimism about these behemoths is way overdone, or he wouldn't be buying one," Cramer added.

Fourth, it appears that Europe is siding with Greece against Germany to get an aid package done quickly. Any sort of a sign that the deal is closed means that Europe is on the mend.

The fifth reason for the rally is that finally the dollar did not rally on Monday. It was hit right from the beginning, and Cramer suspects that it might be related to the fact that U.S. interest rates might not be headed higher as quickly as some thought.

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The sixth reason was because Fed vice chair Stanley Fischer stated on Monday morning that while there is fuller employment, inflation is very tame. That means that if there is genuine deflation, it would be downright silly for the Fed to tighten in September.

The seventh positive came when oil didn't slice through the $43 level. The fact that it can bounce off of a level where it held before made many investors rethink their bearish outlook on oil.

"The uniform negativity on oil is telling, but so far it has been a smart bet. Maybe today it changes, but I'm not yet convinced," the "Mad Money" host said.

Eighth, there was a rotation out of the overvalued winning stocks from the past few weeks. Cramer thinks this could be a great opportunity to buy some of the recession proof names as they come in.

Ninth, the mass exit from media stocks seems to be over. This is the kind of bounce that made Cramer think the stocks have now separated between those that are hard to stream, like Disney's ESPN, and those that are easy to stream.

Additionally, Google announced that it is reorganizing into another entity called Alphabet on Monday night. While some may think that this reorganization is just a cosmetic one, Cramer disagreed.

"I bet Ruth Porat, the new CFO...suggested this bit of financial engineering because it basically separates the Google media business from all of that venture capital it supports so Wall Street—the language she speaks—can better understand this entity as the holding company that it really is," Cramer said.

The final positive was Apple's rally. It has actually been rallying over since it was downgraded by Bank of America Merrill Lynch last week. At this point, Apple is dirt cheap and Cramer urged investors to own it, not trade it.

However, Cramer warned not to these 10 positive indications from Monday's action feed into your perspective for the rest of the week.

"I think that the vast majority of these trends have no real staying power, and we are likely to resume the regularly scheduled negativity in a couple of days," Cramer warned.

But there is no denying that Monday's move proved that it is possible for the market rally. That means Cramer wants you to stay skeptical, not negative. There is still some opportunity out there, especially the stocks that have pulled back to recharge before surging higher.

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