Cramer: Shifting Winds Sweeping Over Street

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With the S&P 500 sitting at or near all time highs, investors are struggling to determine if the market is topping out or breaking out. Jim Cramer thinks the next move is all about a shift underway in Europe.

That's because, in the modern world, most companies either do business with Europe, or they do business with companies who do business with Europe.

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Until now, Cramer says just the potential of further economic weakness has been enough to prevent some buyers from entering the market. That is, they fear that, at all-time highs, even a small flare-up overseas would take down US stocks fast and hard.

However, Jim Cramer believes the potential of a flare-up has just decreased significantly. Through proprietary research, he's identified key developments that lead him to conclude the worst is over for Europe and therefore the rally in the S&P can endure.

"Recall four companies we had on Mad Money this week, Eaton, PPG, Avnet, and Timken," said Cramer. "They are all companies with big European exposure and they all suggested that things are bottoming. These companies cover electronics, aerospace, chemicals, all things technology and steel. That's the vast panoply of everything involved in manufacturing. Think about the representation there."

In addition, Cramer pointed to recent earnings from European banks.

"Earlier this week we saw some incredible quarterly reports from Deutsche Bank and UBS, right on the heels of a good number from Barclays," Cramer reminded.

But the pièce de résistance, he said, involves a new development on Thursday. "It happened at 7:45 a.m," Cramer said.

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That's when the European Central Bank cut interest rates for the first time in 10 months. In addition, ECB President Mario Draghi, promised to provide as much liquidity as euro zone banks needed well into next year and to help smaller companies get access to credit.

"I suspect that there will now be more lending and more hiring in Europe," Cramer said. As more people get back to work in Europe, their ability to spend should increase, which in turn should boost the bottom line of a wide range of companies. "I can not tell you what good news this is."

And when taken in tandem, Cramer thinks is reasonable to conclude that the worst is over for Europe and therefore a very bearish catalyst is coming out of the market.

"I believe the combination of the companies I speak to who do business in Europe, the terrific earnings from once totally on the ropes European banks, and the European central bank's bold move to cut rates, has put in a bottom in Europe," Cramer insisted. "In addition, I say a rebound has already begun."

Call Cramer: 1-800-743-CNBC

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