Cramer: What Will It Take to Reignite Buying?

(Click for video linked to a searchable transcript of this Mad Money segment)

With stocks rising the most in nearly two weeks on Tuesday, Cramer may have discerned what it will take to get the bulls charging again.

"Let me explain the curious transition that I think we have to undergo for the stock market to move substantially higher," Cramer said, "And I do believe it can go higher."

"It's really quite simple. I think all we have to do is reach a point where positive news doesn't wreck the bond market," he explained.


Cramer believes the American economy is about to come back with a vengeance. In fact, he thinks it's already starting to happen.

"Today we got a raft of positive macro economic data; better than expected durable goods orders, higher home prices and improved consumer confidence; it hit a 5-year high," Cramer said.

Now in order for the next leg of the rally to ignite, Cramer believes positive data points, such as those outlined above, can't send interest rates up immediately.

Wall Street NYSE Bull
Adam Jeffery | CNBC

Here's why.

When rates were at historic lows, investors rotated money into dividend paying stocks in a quest for yield. Cramer calls those stocks 'bond-alternative' stocks.

Now, as rates on bonds march higher, some investors are selling those dividend yielders, instead putting money back into bonds.

The higher the rates go on bonds, the more attractive they're becoming to investors looking for safety. "There are still people who are just waiting to sell their dividend yielders," Cramer explained.

Therefore, Cramer said in order for buyers to prevail, those sellers of 'bond alternative' stocks have to become exhausted.

And he thinks that only happens when interest rates overshoot.

"That is, interest rates need to climb to a level at which they can stabilize, even as reports show the economy is getting better and better," Cramer said.

Once that happens, then investors holding stocks won't get spooked by the advance in bond yields and more speculative money will go into stocks due to improving fundamentals.

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Although that sounds like it's a long time in coming, Cramer says it may already have begun. That is, he thinks the market got a small glimpse of that phenomenon on Tuesday. "Investors decided to overlook the slight rise in interest rates and instead they drove stocks higher," he said.

However, Cramer also said don't get giddy - he believes Tuesday's market action was simply a glimpse of the future. "It's not here, yet," Cramer said. "Currently, rates are nowhere near where they need to be and I suspect as they attempt to get there, we're looking at another bearish go round."

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