There were expectations all over the place on Tuesday, and Jim Cramer knows that when that happens there will be some very exaggerated moves on the market.
"Today these moves were all over the map, and the volatility is insane because the expectations are proving to be so wildly off base," the "Mad Money" host said.
Expectations were ridiculously high for Twitter, and Cramer has told investors for a long time to not get too excited about the stock. Jack Dorsey just started as new CEO, and the company will take time to turn around. Yet, expectations remained high, and the stock got pounded for light guidance and weak user growth.
Bizarre expectations were also set for the largest company in the world, Apple. It reported some very good earningsT Tuesday evening. There were many rumors that there would be a slowdown in iPhones because German semiconductor supplier Dialog Semi indicated that business had become weak.
As a result, many investors presumed that Apple had been doing badly.
"Oops, the read-through was once again wrong, and that's why Apple managed to put in a decent after-hours showing instead of going down big as many expected," Cramer said.
Or how about DuPont? Cramer was absolutely aghast at the horrendous quarter reported by DuPont on Tuesday. But even as shocked as he was, DuPont's management was even more appalled. The company basically said in its statement that everything is on the table, and it will do whatever it takes to maximize value.
Expectations were unfulfilled but because management proactively addressed the issues, DuPont rallied almost 3 percent on its horrendous numbers.
Cramer has also repeatedly advised investors to own Rite Aid. He understood the expectation that if it got earnings together, then the stock would soar. If it didn't get it together for earnings, it would catch a takeover bid.
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The company faltered on its last earnings report, but sure enough, the stock was hammered, and it caught a $9 a share all cash bid from Walgreen's Boots Alliance.
"There are lots of different kinds of expectations and lots of different reactions by the stocks, which is why you need to know what people are looking for, not just what is said," Cramer added. (Tweet this)
If those expectations are understood, then Cramer says you will have the key to understanding the bizarre movements that hit the market on Tuesday.