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Central Banks Save the Day, But Can Rally Continue?

Stocks rallied sharply Wednesday after global central banks announced a plan to support the global financial system. The European Central Bank, U.S. Federal Reserve, Bank of England and the central banks of Canada, Japan and Switzerland agreed to coordinated action to ease the increasing strains on the global financial system.

The move is designed to "enhance their capacity to provide liquidity support to the global financial system." Had global central banks failed to intervene, Cramer thinks there would have been a Lehman Brothers-style event in the next ten days, especially since lending to most European banks had been dwindling. On September 15, 2008, Lehman filed for Chapter 11 bankruptcy protection, marking the largest bankruptcy in U.S. history.

With the likelihood of such a bankruptcy off the table, the markets drew their attention to better-than-expected economic news out of the U.S. The pace of job growth in the private sector accelerated in November, with U.S. employers adding 206,000 jobs, according to the ADP National Employment report. Also on the jobs front, the number of planned layoffs at U.S. firms edged down 0.7 percent in November, according to a report from consultants Challenger, Gray & Christmas.

The Fed's Beige Book showed that economic activity in most major U.S. regions increased at a slow to moderate pace over the last two months.

Meanwhile, business activity in the Midwest grew faster than expected in November as orders surged, according to the Institute for Supply Management-Chicago business barometer. And pending home sales jumped in October by the most in nearly a year to 10.4 percent, according to the National Association of Realtors.

Given the overall improved outlook, should investors continue to play the rally?

“Unfortunately, I can't give you a totally straight answer, only a bifurcated one, because painting with too broad a brush in this market is a recipe for disaster in this market,” Cramer explained.

The “Mad Money” host reiterated that investors should consider buying American companies, such as retailers thanks to a robust consumer. Oil is another sector to consider, as demand remains high and tensions grow in Iran. He also likes high-yielding stocks, whether they are industrials, master limited partnerships or health care names.

On the same token, though, he would use this strength to sell any bank stocks because the sector likely faces further challenges down the road, such as greater regulation. Investors could also start selling technology stocks that are up, but only if the fundamentals aren’t any good. He thinks it’s a good idea to lighten up on any stocks that don’t yield as much as they did on Friday.

—Reuters contributed to this report

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