The market finally caught a break on Tuesday, Cramer said during Mad Money, with the Dow jumping 150 points and the S&P 500 gaining 1.3%. At last the sell-offs, which had little to do with the actual businesses of stocks and much more to do with the vicissitudes of foreign countries and the way hedge funds trade them, were reversed.
What can investors learn from this rally so they can catch the next one?
First, right now our stock market is deeply tied to the European markets, the Mad Money host said, because some of their countries seem to be on the verge of filing the sovereign equivalent of bankruptcy. For this reason, hedge funds sell everything and short everything, including our markets. Also, as the crisis depended, Jean-Claude Trichet, the European equivalent of our Federal Reserve Chairman Ben Bernanke, cut short his trip to Australia to deal with the emergency. The hedge funds saw this as a sign that Trichet was going to solve the crisis, and the market started rallying.