Panicked selling in the month of October set some stocks up for victory in November, CNBC's Jim Cramer argued Thursday.
"The single best thing that happened to stocks in November was the hideous bruising that we got in the month of October," he said on "Mad Money." "Bizarrely enough, the newfound sense of fear and negativity created by the October meltdown is the best thing that could've happened to this market, because it gives stocks the breathing room that they need to roar higher again."
The major averages pared their gains in Thursday's trading session after the Federal Reserve announced it would leave interest rates unchanged. On Wednesday, much of the market rallied on the heels of Tuesday's election results, in which the Democratic Party regained control of the House of Representatives and Republicans maintained Senate control.
"After yesterday's 500-point Dow rally, I see a market that suddenly is beginning to make some sense," Cramer said. "If you're a bull, you need a day like today that consolidates and cements yesterday's move."
Cramer said that three companies encapsulated why October was so good for stocks: Apple, Amazon and Alphabet. Amazon and Alphabet issued their earnings reports in the final days of October, while Apple reported on Nov. 1.
Amazon's third-quarter report showed earnings that nearly doubled analysts' estimates, but just missed revenue estimates. Paired with a weaker-than-expected forecast, the results took Amazon's stock down 10 percent. To Cramer's surprise, the analyst community then added on to Amazon's pain with a wave of price target cuts and stock downgrades.
Alphabet's stock saw a similar fate. After its third-quarter earnings report topped earnings estimates but missed on revenue, analysts slashed their price targets for the Google parent's shares and "sentenced [it] to die," Cramer said.
As for Apple, which delivered fourth-quarter earnings and revenues above Wall Street estimates, analysts raised concerns about the iPhone maker's new earnings structure, which will not break down individual results for Apple's products. Again, the consumer products giant's stock was peppered with price target cuts and downgrades.
"What did the negativity accomplish besides getting you out at the bottom? Well, it reset expectations," Cramer explained. "In other words, the newfound pessimism has finally lowered the bar enough that the risk has been seriously diminished by the widespread feeling of despair" in all three sliding stocks.
Those muted expectations could set the entire stock market up for success as the lucrative holiday season approaches and investors move past the latest Fed meeting and the midterm election, the "Mad Money" host said.
"We have expectations that are now lowered to the point [where,] for most stocks, anything good could cause them to fly," he said. "I think it's entirely possible that, with a few more placid days like this one, we could get sideline money to come back in, as the calendar and stock cupboard are bare and maybe it's time to get long."