Jim Cramer wants investors to start preparing for the inevitable. Friday's terrific employment report made it very clear that the Federal Reserve has no choice but to raise interest rates at its next meeting in December, and rate hikes are not good for a vast majority of the stock market.
There is one sector that will do better when the Fed tightens, and that is the financials. This is because when rates go up, banks will make more money from customer deposits.
That is why Cramer turned to Tim Collins, a technician and colleague at RealMoney.com, to take a look at what the charts have in store for financials going forward.
Collins was worried when he looked at the relative strength index, or RSI, which is an important momentum indicator. The RSI for financials has been hitting high levels since mid-October, but, currently, it looks like it could be close to breaking down. If the RSI breaks down, Collins fears that the XLF, the S&P financial ETF that contains all of the big banks, could follow it down.
Ultimately, Collins thinks that the XLF could trade sideways, between $23.75 and $25 for a while.
"In short, the daily chart of the big Standard & Poor's financial ETF is not looking as hot as we might expect, given that I think the banks are about to become some of the sexiest stocks imaginable," Cramer said.