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Sell Block: Prepare for a Pullback?

Take profits before the next sell-off, Cramer told viewers Thursday night. While he expects the market to trend higher over the long term, the Mad Money host said a quick dip in stocks could be coming.

After the past six weeks worth of rallies, investors should want to pocket their gains anyway. Remember: Bulls make money, bears make money, but hogs get slaughtered. Not to mention, Cramer is a fan of “buy and homework,” not “buy and hold.” When the market conditions change, he urges viewers to change with them. And it looks like a temporary shift is on its way.

Doug Kass – Cramer’s colleague at RealMoney.com, the paid sister site to TheStreet.com, where Jim is chairman – called the market bottom at Dow 6,500. After eight years as a bear, Kass reversed his position when he realized there was little downside left for stocks. Well, now he thinks the market is overbought, and he’s predicting a 5% to 6% correction before the overall upward momentum continues.

Kass right now is what’s called the “hot hand.” This is the guy who seems to know what’s coming next long before anyone else on Wall Street, and it often pays to follow his lead. Even Cramer used this hot-hand theory of investing during his hedge fund days, returning hefty profits to his clients, so the strategy works.

Kass seems to think that too many stocks are above their 50-day moving average, and this bullishness historically has led to a sell-off. Case in point: housing. Kass believes, like Cramer, in the coming housing bottom. But recent moves in Toll Brothers and Lowe’s have already anticipated that bottom. The time to buy these stocks has already come and gone, so it doesn’t make sense to join this new crop of bullish converts now.

Cramer left it up to Mad Money’s viewers to decide whether or not they’ll heed Kass’ advice, but the man has been right many times before. Anyone who does trust the thesis, though, should take a decent sized piece of his or her holdings off the table. Cash out and use that money to buy back into the market after the decline.

Most importantly, Cramer said, is that investors reserve the right to sell. The idea that timing the market is both impossible and immoral is wrong, though it’s often accepted as common wisdom. If there’s a chance to sidestep a correction, then by all means do so. And this might be just such an opportunity. Remember: The key to thriving in the stock market – especially these days – is by being flexible and quick. So if it’s time to sell – sell.

Questions for Cramer? madmoney@cnbc.com

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