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 alone, there were 35 companies that went public or 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.