Jim Cramer is starting to see the same pattern play out in the market lately, and he wants investors to be ready for a big change when employment numbers are reported on Friday.
With each company that reports disappointing earnings, stocks still manage to rally. It seems investors recognize they were bad, but not so bad that it causes a panic into selling.
While Cramer recognizes that some of the rallies are due to portfolio managers underweighting the industrials, there is also something else at work here. Investors have noticed that the Chinese consumer is getting stronger, Europe is turning and the U.S. has a strong market in housing and autos.
That means these down-and-out stocks are now attractive. The big question remains — how long can it last?
Cramer thinks this can continue right into Friday's employment number, and then some of the groups will pause. A few of the stocks that Cramer will be watching are J.C. Penney, which has strong management that Cramer likes, though he prefers to stick with Macy's.
If there is a strong number, then the Fed will likely move in December, which will send bank stocks higher and prompt other groups to stall. A weak number could trigger a need for safety, and these new ugly-duckling stocks could be sold off.