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.
Cramer added that the market is extremely oversold now, so investors should expect some volatility to the downside on Wednesday—but only if the market opens down.
The second reason for the rebound was that the Chinese government finally figured out that it needs to stop propping up the junk stocks, and should instead pump liquidity into the system and lower interest rates. In fact, Cramer expects another selloff to occur in China overnight Tuesday to bring it closer to erasing its entire gain since the Chinese rally began a year ago.
"No one is bigger than the market, not even the Party, which seems more like a pajama party these days than a nearly omnipotent totalitarian regime," Cramer said.