Are Investors Blind to Bad News?

Something’s happening in the market that you don’t have to like, but you better try to capitalize on: Stocks that should go down are pushing higher regardless.

Deere suffered downgrades after issuing negative guidance, with both J.P. Morgan and Wells Fargo telling investors to sell at $68, but the share price is up $7 since then. Buckingham Research dropped Gymboree to “neutral” from “buy” after the kids’ retailer announced sour same-store sales numbers, but today the stock rallied 22 percent on news that Bain Capital would take it private for $1.8 billion. And J.C. Penney management in August cut its outlook and said the dire job situation would hurt business, but JCP has climbed $14 from the $19-a-share low that followed those comments.

This list goes on. Cramer could cite similar examples as varied as Nucor , Boeing and the semiconductor stocks. Sure, Kulicke & Soffa fell after delivering disappointing earnings, and that rippled out to affect related chipmakers like Novellus and Lam Research , but the Philadelphia Semiconductor Index as a whole shot higher in spite of KLIC. And semiconductor-equipment company Applied Materials saw gains, too.

“Do you see the pattern here?” Cramer asked viewers on Monday. “The market doesn't want to react to the terrible things the companies are saying. If it's bad, the big buyers come in.”

It may not seem right, it may fly in the face of investing logic, but that doesn’t matter. Not in this market, Cramer said, where “bad news is just another way to say buying opportunity.” There’s no question the bearish case against these stocks was based on facts, but investors right now just don’t want to hear it.

Cramer’s message to viewers? Use that to your advantage.

“You don't have to like it, you can think these are all signs of irrational exuberance, but if you don't find ways to profit from the irrationality, why even bother … investing? Trust me, if we only made money when it makes sense, everyone would be a whole lot poorer.”

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