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Jim Cramer has noticed a peculiar pattern behind the stocks thriving this earnings season.
"Right now demand is the secret sauce driving stocks higher. Is there demand for the product and does it exceed supply? That's how you sort out the winners from the losers in this peculiar environment," the "Mad Money" host said.
Cramer proved his thesis with just one look at the action behind Boeing. The stock has spent ages in the doghouse after a long period of outperformance. On Wednesday, the company raised its earnings and revenue forecast, and the stock rallied even before the open.
Then management said that some parts of the business, specifically wide body aircraft, had soft sales, and the stock plummeted. But then Boeing clarified that demand for narrow bodied planes is extensive, and the stock snapped right back and ultimately closed up more than 4 percent Wednesday.
Cramer sees the same roller coaster ride over and over. Management guides up, gets challenged, then becomes accepted again. All within two hours' time!
Boeing's stock mainly rose because of demand, Cramer said. As soon as Boeing said it saw tremendous long-term demand for its products, the stock turned around.
The gigantic move in Northrop Grumman gave another example. The demand for defense equipment is tremendous around the world, and Northrop Grumman dramatically raised its guidance.
"It looks like there is stirring demand for money, that's right, money that is lent by banks," Cramer said.
In the banking industry, KeyCorp CEO Beth Mooney told Cramer on Tuesday that average loans rose year over year.
The same thing happened with Apple. Cramer noted that demand for the new iPhone greatly exceeded supply after the tech giant reported earnings Tuesday.
Takeover talk also propelled stocks. Apple discussed a potential large acquisition, and Cramer suspects that Netflix could be a takeover target for Apple, as it could easily afford the company.
"But I say if they weren't interested in Netflix at $25 billion, I can't imagine them wanting it at $70 billion," Cramer said.
Ultimately, if the demand for a product exceeds the supply, it will translate into higher demand than supply for the stock, too. Unfortunately the opposite is also true, which is why so many companies are feeling the pain.