Charts vs. Fundamentals

The estimates are all too high. That's what we discovered yesterday, and somehow that juicy S&P 500 chart may not be enough to save us.

Let's understand each other. This market is being driven by charts that clearly and without even an iota of doubt for many show the most definitive and distinctive bottom I can recall.

Every day is a search for reasons why that could be. There are maybe ounces of strength in this market vs. tons of weakness.

But the charts say, "Buy every weakness."

There are multiple periods in my investing experience where we know that the fundamentals bottom well after the stocks. We know that it often works out that way.

Exxon (XOM - commentary - Cramer's Take) topped well before the commodity, Then Exxon bottomed well before the commodity. Then Exxon topped right before the commodity -- the last one being a little too close for comfort -- but it did foretell one of the worst declines ever in oil when it fell and the group rallied on Tuesday.

I cannot be a chartist; I just talk to them and look at them. I react to bottom-up analysis -- as you can tell from my Dow Jones analysis, which has the market not being able to get through 10,000 this year. My best tell of bottom-up is that I get comfortable when the earnings estimates are too low.

We know they were not low enough for Alcoa (AA - commentary - Cramer's Take) and Intel (INTC - commentary - Cramer's Take), hence yesterday. We also know that there are a host of companies due to report -- Boeing (BA - commentary - Cramer's Take), Caterpillar (CAT - commentary - Cramer's Take), Freeport (FCX - commentary - Cramer's Take), Schlumberger (SLB - commentary - Cramer's Take) -- where I think the estimates are too high. Parker-Hannifin (PH - commentary - Cramer's Take). Too high. Nucor (NUE - commentary - Cramer's Take), too high. U.S. Steel (X - commentary - Cramer's Take), too high. All retailers except Wal-Mart (WMT - commentary - Cramer's Take), too high.

I know the chart says I don't have to worry about that. But when you take the most important stock in a sector and you get a big miss, then the ETF boys come down hard on the whole sector, which is why I said yesterday I would be buying puts on Transocean (RIG - commentary - Cramer's Take) and National Oilwell Varco (NOV - commentary - Cramer's Take).

Nowhere is this more evident than in the banks: Bank of America (BAC - commentary - Cramer's Take), JPMorgan (JPM - commentary - Cramer's Take), Wells Fargo (WFC - commentary - Cramer's Take), PNC (PNC - commentary - Cramer's Take), Capital One (COF - commentary - Cramer's Take) -- they are all too high. The insurers? Not enough reserves, they are all too high except Travelers (TRV - commentary - Cramer's Take) (although I still think that the guy who made the big splash with the fear game with Lincoln (LNC - commentary - Cramer's Take), and Hartford (HIG - commentary - Cramer's Take) and Pru (PRU - commentary - Cramer's Take) and Met (MET - commentary - Cramer's Take) and most of all Principal (PFG - commentary - Cramer's Take), should stand up and be accounted for).

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

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.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.