The major averages may paint an ideal picture for the stock market, but CNBC's Jim Cramer warned on Tuesday that some strong sectors aren't enough to sustain a long-term rally.
"The truth is that while a couple of groups are leading the way here, namely tech and retail, very few stocks away from those groups are following," the "Mad Money" host said. "If we don't get some more followers soon, this could spell the end of this advance."
But he knew that two strong sectors simply couldn't take the rest of the market to new highs.
"The bulls have retail, which means the consumer is smoking, and the bulls have tech, the largest sector in the S&P 500," he admitted.
"Sadly, that's where it ends," Cramer said. "There are so many other groups lagging behind and they represent a major obstacle to this market charging to new highs."
Obstacle No. 1? The bank stocks, the second-largest market sector after tech and one that Cramer has frequently labeled a necessary "leadership group" for any rally.
"As long as interest rates keep falling, the bank stocks will remain out of favor," Cramer said. "We've entered a theater of the absurd ... where the only thing that can bolster this group is the thing that will ultimately slay it: interest rates."
This debacle stems from an age-old idea that as interest rates rise, banks instantly get more profitable because they earn better returns from investing consumers' deposits risk-free, Cramer said. So when rates fall, many market-watchers assume the banks will suffer accordingly.
"I think it's insane that the bank stocks are so cheap when the loan growth is this strong," he said. "J.P. Morgan, best of the bunch, [sells for] 11 times next year's earnings. Bank of America? Ten times next year's earnings. Citi? Nine. Goldman Sachs, my alma mater, [sells at] nine and a half. Come on!"
For now, Cramer acknowledged that investors are unlikely to come around to the bank stocks despite the underlying companies' seemingly attractive value propositions.
But he hoped that when federal regulators issue the banks' stress test results at the end of June, which could spur share buybacks and dividend raises, Wall Street would warm back up to the group.
And it wasn't just the banks: Cramer noted that shares of the drugmakers, health insurers, medical device makers, transportation companies, airlines and consumer goods plays were all struggling to pull their weight.
"Here's the bottom line: without more leadership than the techs and the retailers, you can't expect this market to make a legitimate assault on new highs as so many people are now expecting," Cramer said. "The bulls can claim it's a work in progress, but the bears just say it ain't working. We need to see more leadership, and while I think it can emerge, right now it's just nowhere in sight."
Disclosure: Cramer's charitable trust owns shares of J.P. Morgan, Citigroup and Goldman Sachs.