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Cramer: This rally could last...if China shuts up!

If there is one lesson that Jim Cramer has learned about the market, it is to never forget what brought it down and certainly don't forget what brought it back up. Most of the time unfortunately, investors forget these elements and let emotions control their actions on the tape.

However, the "Mad Money" host prefers to be clinical about things and remove emotions from the equation altogether. For instance, before Wednesday, oil stocks have been declining for ages, and the oil complex has been regarded as one of the most dangerous groups out there.

Cramer reviewed the oil charts with technician Bob Lang on Tuesday and actually found that the charts showed some of the major oil patch players were ready to bounce back. And despite the outrage from many investors that Cramer received, Wednesday marked one of the biggest oil stock rallies in ages.

"You know I haven't liked the set-up for ages, and that skepticism has been warranted as the Dow had been down nine out of the last 10 days. But, like the oils, this kind of selling can get overdone," Cramer said. (Tweet This)

Wednesday brought a second day of the Chinese devaluing its currency again, causing widespread implications. As a result, China pulled down a host of currencies worldwide and crushed commodities such as minerals and grains—but it didn't pull down the price of crude.

An Apple store in Bangkok, Thailand.
Brent Lewin | Bloomberg | Getty Images
An Apple store in Bangkok, Thailand.

So, while it was a horrendous morning for the bulls on Wednesday, Cramer remained calm because he recognized that the right ingredients were in place for the market to rally. After all, the data indicators that he looked at were flashing green lights while the rest were flashing profoundly red.

There are three elements that Cramer has been focusing on in the past few weeks: the superfreakin' strong dollar, oil and China.

"I decry a strong dollar. It's bad for the mother's milk of higher stock prices, the earnings estimates, which will keep on having to be slashed if the greenback keeps jaunting higher," Cramer said. (Tweet This)

But on Wednesday morning, the dollar went lower, not higher. So, when an indicator like that was going the right way, Cramer knew to take the other side of the sell trade.

In Cramer's opinion the dollar was weaker because investors realized that the situation in China has shocked everyone so much that the Fed may consider it too risky to raise rates right now.

And a weaker dollar means that oil could stabilize, which is exactly what happened. Another bullish sign.

However, the plummeting of all the other commodities meant that long-term interest rates in the U.S. went down. That means that bond market equivalent stocks would go higher, and sure enough stocks like General Mills and even Procter & Gamble moved higher.

But the best indicator that Cramer was happy to see was that Apple was finally able to shake off the big, bad Chinese panda bear that has been trying to take it down. And while it has absolutely been hurt by the Chinese economy, Cramer heard two pieces of evidence that made him think that maybe the Apple Watch isn't the total washout that everyone seems to think it is.

Read more from Mad Money with Jim Cramer:

Cramer Remix: I can't believe this stock is a buy
Cramer: China's trade war on the US could be huge
Cramer: Why oil is in better shape than you think

So, while the high-growth stocks were hammered on Wednesday, and the banks are still in total limbo, Cramer saw a silver lining to the action.

"The late-day rebound will have some staying power if China just shuts up for the evening and doesn't do anything catastrophic. That would be a welcome change from their desperate flailing," Cramer said.

Ultimately, the bears get scared when there is any sort of a reversal. And after nine out of 10 down days, the bulls cannot stay complacent in the downturn.

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