Jim Cramer watched as stocks leaped to the best day seen since 2011 on Wednesday, leaving him to wonder—what made Wednesday so much different than Tuesday? When stocks collapse into the close of trading one day, like they did Tuesday, and then hold gains the next day, he has to dig a little deeper to find out what happened.
What Cramer found was a stock phenomenon created at the closing bell on Tuesday that he has not seen since the great recession. He saw the occurrence of accidental high yielders. These are stocks that have fallen so far so fast that their dividends suddenly provide investors with huge yields.
Verizon clocked in at a whopping 5 percent at the bell, along with General Electric and Procter & Gamble at 4 percent. These are all strong balance sheet companies, and the opportunity was too good to pass up for Cramer considering that the 10 year treasury yields just 2 percent.
"I think we've got some substantive things happening that are pretty positive, and some more ethereal, mechanical and even purely emotional factors that could be drivers here," the "Mad Money" host said. (Tweet This)
Another positive occurrence happened in the oil patch. While oil did not go up Wednesday, the largest oil service firm Schlumbergerbought Cameron for $14.8 billion in cash and stock. This was a big deal for Cramer, because Schlumberger paid a huge 56 percent premium for Cameron. It wouldn't have made a move like that if it believed that drilling was going away.
Schlumberger committing this amount of capital was a signal to Cramer that we could be closer to a bottom than most people think, and it couldn't afford to wait to snap up Cameron. This bullish move put a bid under energy stocks, even as oil went down again.
Sometimes Cramer can see a drastic difference between what occurs in the real world versus the stock world. Raw emotions and fear can drive stocks to new levels, as was seen on the averages this week with its wild swings.
One of the great underlying themes of this market for Cramer is the housing market. The rising price of homes and consumer desire to invest in their homes are a great foundation for a solid investing platform.
Cramer loves the housing group because it punches above its weight. Meaning, while it is only about 10 percent of the U.S. economy, its ripple effects can be seen all over the place ranging from retail, banking and real estate sales to title insurance and document processing.
"When you're dealing with a market that's still very treacherous because of Chinese weakness, even after today's rebound, you need to search for bullish groups to take advantage of the flow of funds out of suspect areas and into positive ones," the "Mad Money" host said.
So despite the fact that Toll Brothers stock was slammed this week, both Best Buy and Toll Brothers gave Cramer the impression that housing is the place to be even if there is a small rate hike.
"The forces are in place for a multi-year move, despite what the stock market might seem to be saying," Cramer said. (Tweet This)
With back to school season in the horizon, Cramer took the time to catch up on homework. He circled back to the stocks that he did not have the answer for previously, in order to give a well-informed take on the company's prospects.
First up was NeoPhotonics, which is a tiny developer of fiber optic components. The stock has been a dog for ages, as it came public in 2011 and finished the year trading at less than half its IPO price. It bounced back hard in the beginning of 2015 and has sold off dramatically. As this company is highly connected to China, Cramer recommended staying far away.
Another stock Cramer looked at was Shopify, which was one of the hottest IPOs when it came public in May. Cramer was torn on this one. In a different environment he would have recommended to buy the stock. But given the current situation, he advised to tread carefully and to only buy into weakness.
While most investors are trying to figure out if Wednesday's rebound is the real deal, Jim Cramer reminded us that there are a lot of factors that can influence the market's action. One of those factors is the IPO market.
"When you see a lot of companies coming public, especially a lot of low quality companies, then that is a very bad sign for the averages because it means the stock market is getting flooded with new supply," the "Mad Money" host said.
Just like any market when supply exceeds demand, that creates lower prices. And when the supply of new deals dries up, it is a sign of a nearing bottom.
In June along there were 35 companies that came public, that is nearly two IPOs for each trading day. That was a sign that worried Cramer, as it coincided with a peak in the market. The good news is that the pace of new deals did slow down for a bit, as July had 17 IPOs. That is still a lot, but fewer than June.
So far in August there has been only 10 deals, which is a more reasonable number for Cramer. But what he really wants to see is no IPOs, at least for the moment. Fortunately there hasn't been a new deal since the market took a nose dive in the past week and a half and there are no new IPOs scheduled for the next week and a half.
"That gives me hope that a bottom might be closer at hand than many people think, even after a nice up day like this one," Cramer said.
Cramer was reminded of a group that is doing well when he saw how apparel stocks bounced back nicely on Wednesday. PVH, the global apparel company behind Calvin Klein, Tommy Hilfiger and smaller legacy brands like Van Heusen and Speedo reported a solid quarter.
While sales came in a big light courtesy of the strong dollar, it still delivered an 8 cent earnings beat from a $1.29 basis. The company also raised its full year earnings guidance and had bullish comments about the future.
Is PVH back in style? To find out, Cramer spoke with its chairman and CEO Manny Chirico.
"As we are getting into the second quarter internationally the business continues, both Calvin and Tommy, to be very strong," Chirico said.
In the Lightning Round, Cramer gave his take on a few caller favorite stocks:
Fiserv Inc: "Good financial service, I happen to love those kind of financial service providers. They do quite well in this environment. I'm going to say buy buy buy."
Transocean: "I say if we are looking at a bottom, then go buy Schlumberger, merging with Cameron. That is going to have some arbitrage pressure, but I like that if we are going to be in the oil services business or Core Labs."