For sure, a bull market offers an easier opportunity to make money, Cramer said Wednesday, “but that doesn’t make it a cakewalk.”
Investors still need to know the different elements of a bull market and how to take advantage of them. Whether it’s understanding the importance of stock leadership, the role that money managers play or the power of technical indicators, each piece is crucial to generating better returns. Cramer used today’s Mad Money to explain it all.
Leadership is the most important part of a bull market, he said. Every significant move higher has been driven by a group of sectors, and a select group of stocks within them, that both defined and controlled that move. They also have the ability to predict the bull market’s behavior.
“If you know what the leaders are and understand how they move,” Cramer said, “you don’t get blown out … like so many others at times when you should be buying.”
The leaders are the first sectors to rally off the bottom, and they carry a tremendous amount of momentum once the rally gets going. When other sectors are down, the leaders are up – and usually up big. For instance, the banks, oils and tech names led the Dow higher when it broke out from its early March 2009 lows. These three groups helped to add a couple of thousand much-needed points to the index.
Other stocks and sectors then follow these leaders. The 2009 bottom in Google , Apple and Research In Motion and their resultant rally also boosted the shares of Yahoo! , Intel , Qualcomm and others. The moves in Schlumberger and Transocean gave a green light to Apache , BP and Halliburton . Wells Fargo , holder of many toxic California-based mortgages, bottomed and then investors flooded into Bank of America , JPMorgan Chase and State Street .