Houston, We Have a Bottom

The Dow lost 320 points Wednesday, the day after a 75 basis-point rate cut, and then surged back to close up 299 points. That only happened because the market showed all the signs of a bottom, Cramer said during tonight’s Mad Money.

Stocks are too cheap and oversold, the Fed’s (finally) acting with a sense of urgency and the whole ordeal has been on the front page of The New York Times – all telltale signs for Cramer. So the question now is, what do investors do next?

A new cycle’s starting, the Mad Money host said, and with it comes a changing of the guard. The former leaders – the Medco Healths , John Deeres , Exxon Mobiles , BHP Billitons or Boeings – will be replaced by what was the worst of the worse: banks and retail.

But that’s just how it goes, Cramer said. “Big money says, 'sell the leaders and buy the laggards.' ” That’s how institutional investors think, and that’s how these trends get played out.

But Cramer doesn’t necessarily agree with that. There isn’t a worldwide crash coming that will kill commodities prices, forcing us to cut back on oil and gas, aerospace and defense and construction. Agriculture might still have a ways to fall because its decline started later than other sectors’, but Cramer recommended holding on to the rest through the cycle.

The financials and retailers work, though. They’re inexpensive and a motivated Fed should boost both these industries. Yesterday, Cramer offered TJX as a stock to own, and he’s bullish on CVS Caremark, too. Costco, Guess and J Crew Group all got the thumbs up as well.

“The times may be a’changing, but the stocks remain the same,” Cramer said. “Both the old leadership and the new look like buys now that we’ve come through the panic and bottomed.”

Jim's charitable trust owns CVS Caremark.

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