There's a bit too much optimism in the stock market right now, so it would be smart to do some selling, CNBC's Jim Cramer said Thursday.
"I'm not saying you should expect a big sell-off. I don't," the "Mad Money" host said, emphasizing the market's rally is real, not phony.
"But the bottom line is that when you have a jailbreak of immense stock proportions like we're having right now, you need to remember that not everything will work out perfectly."
After back-to-back record highs for the Dow Jones Industrial Average and the Nasdaq earlier in the week, the three major indexes rose again Thursday as trade war optimism caused a rotation out of bonds and into stocks.
There also were signs of strength in retail and semiconductor stocks, as well as in banks, Cramer said.
But Cramer said he thought the reasons for optimism surrounding these areas were not as solid as they need to be.
When it comes to the trade war, Cramer said it's still too early to buy into the most recent news. "Just the other day we heard they were going badly," he said.
But then on Thursday, there were reports that China and the U.S. agreed to roll-back some of the tariffs — though those reports began to fill with doubt as the day wore on.
Additionally, China announced it was harshly sentencing people involved in a fentanyl production ring, which Cramer views as a concrete sign of progress in the trade talks.
"Of course, it is entirely possible that something positive is going on, that tariffs could be rolled back," Cramer said.
Even so, the host cautioned, "Let's see what else they agree to before we get too giddy ... I don't like how everything suddenly seems so rosy, just 48 hours after everything seemed so horrible."
But the scale of the movement — the S&P 500 retail ETF is up around 3.5% in the last five days — is probably not fully warranted, Cramer said.
"The problem is, it's very unlike that all these retailers are doing well," Cramer said. If you're going to buy a retail stock, make it Columbia Sportswear, he said.
Otherwise, he said, "time to trim."
Cramer said he is seeing some amounts of overreaction around bank stocks, too. He noted he is a "huge champion" of the banks, but even that positive view has limits.
"Can we just admit that the people buying these banks, let's just say they aren't exactly early" Cramer said.
Sure, some of the largest banks could benefit if they gain access to the Chinese market, Cramer said. But aside from that prospect, "I doubt business has gotten that much better that fast," he said.
"I think it's too tenuous given that we are in the midst of a slowing economy," he said.
"I say dream on," Cramer said.
At the end of the day, Cramer said, there are reasons to be positive, but the perfect world will never last.
"When the market starts behaving like we're in the best of all possible ... worlds, it's time to ring the register," Cramer said. "That way, you'll have more cash to work with the next time things go south. Because we know, sadly, that they always do."