Beware the Cyclical Head Fake

Head fake!

That's what I used to say just about every year at this time, right about now, when the cyclical stocks would run in anticipation of another "big" year when estimates looked solid as a rock.

And then the cuts began when the quarters got reported, quarters like that just reported by Alcoa (AA - commentary - Cramer's Take).

I remember it because when the kids were young, we would repeatedly go to Disney World during the first week of January. They weren't in school and there was no way I, a hedge fund manager, would leave with one week left in the year -- too many strange things could happen. (I was core long Disney (DIS - commentary - Cramer's Take) then! Not now.)

Sure enough, I would call in typically from the pay phone -- no cell phones then -- outside of "It's a Small World" and ask for quotes. At the beginning of the year, day one, I would buy Reynolds Metals (now Alcoa), Phelps Dodge (now Freeport-McMoRan (FCX - commentary - Cramer's Take)) and Dow Chemical (DOW - commentary - Cramer's Take) and Dupont (DFT - commentary - Cramer's Take), and play the glad tidings game. By day three I would sell them.

By day four -- tomorrow -- I would short them, as it was way too dangerous to actually own them when they report.

Now I know everyone is jazzed about the stimulus and the "action," with the action being enhanced by the Ultra funds impact, but I wonder if the same thing won't happen again.

Some of these stocks have run so much and the quarters will be so awful that you can get a better price down the pike.

I am not blasting the cyclical move. Their downside was exacerbated by the forced selling of hedge funds (check out an excellent piece about Fortress in my fave column Hedge Fund Hell on TheStreet.com) and the stimulus, particularly the Chinese stimulus, may be a powerful second-half elixir.

I am simply warning that I have seen this movie before, even in bull markets, and I know that every time I overstayed my welcome, I had my head cut off.

Again, even in bull markets, which is what this market acts like.

So don't overstay your welcome.

At the time of publication, Cramer was long FCX.

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Jim Cramer is co-founder and chairman 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. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

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