Sell Into Financials' Nonsensical Strength

You get violent moves like the move in Fannie Mae (FNM - commentary - Cramer's Take), PNC (PNC - commentary - Cramer's Take), AIG (AIG - commentary - Cramer's Take), Comerica (CMA - commentary - Cramer's Take) and the rest of the financials when someone is caught, when someone can't bring the short in. These moves are not natural. They are more of a sign that someone leaned the wrong way, perhaps short these financials as a hedge against the fixed-income junk that they might be long.

You have to understand that the whole time we have had this brutal selloff in fixed income, hedge funds have sought to have any hedge on against this stuff. They tried to short the mortgage companies and the homebuilders, but there weren't enough shares left. So they went to work on the Fannie Maes and the PNCs and the AIGs.

But this is a dangerous short position to have in front of a Fed meeting. Any change, any statement that acknowledges the stress, will cause a rally. For all I know, someone 's rumoring that we are going to get something good for the financials, and that's causing the squeeze -- and it is a squeeze.

If you own some of these beleaguered names, you need to peel off something, just in case the Fed does nothing good at all.

That way you can deal with a reversal of this whole move.

Given that the move down has been without relief and given that we are so oversold, you can see the nuttiness of the whole thing: Some fund is long mortgage bonds that can't be sold and is short the BKX or individual banks and:

1. Wells Fargo (WFC - commentary - Cramer's Take) announced a 50-million-share buyback.
2. No new bad news comes out and Bear (BSC - commentary - Cramer's Take) seems isolated (for now).
3. People smell that someone's short the wrong stuff and are gunning the group.

Given these declines, it is only right that we catch a bounce. How long does it last?

Doesn't matter. You sell some into it and get ready for either another rally where you sell some or a brutal selloff where you are in better shape than you would have been otherwise.

At the time of publication, Cramer was long Fannie Mae and AIG.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. Click here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click here to order his book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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