Tuesday was a classic example of why Jim Cramer hates a big opening, and why he always warns investors not to bite on them. He always prefers to reach for stocks, not chase, because when you chase you will get burned.
"We didn't have the ingredients I like to see. We had strong dollar, not weak dollar. We had a chink in the best domestic stocks, the housing sector, and interest rates soared—something that is the bane of the stock market's existence," the "Mad Money" host said.
So, how was the market even able to rally, let alone surge big, for most of the day?
The first reason for the rally was that stocks were dramatically oversold going into the day. The Dow dropped almost 1,500 points in three days, with five straight days of decline in total. So, the market was due for a bounce, even if it was temporary.
However, these positive reasons weren't enough to stop the market from giving back all of its gains and then some in a brutal intraday reversal. Cramer saw many signs flashing in the market on Tuesday that made him skittish about the rally.
Interest rates had a massive spike, and Cramer is old-fashioned enough to know that it's bad news to see any competition to higher yielding stocks. The spike was so dramatic that it surprised many investors who were betting that bonds were the safe haven from the chaos overseas.
What really worried Cramer though, was the lack of leadership in the Federal Reserve as there are various Fed officials who are spouting their point of view regardless of the negative implications they have on the market. Investors do not like uncertainty, and that is what these opinions perpetuate.
"The stock market is a free fire zone until Yellen tells these yahoos to pipe down. The Fed's become untrustworthy with its indecision and multi-tongued guidance, or lack thereof," Cramer said. (Tweet This)