Anatomy of a Rally: Part 2

Editor's note: This is the second installment of a multipart article. Be sure to read Part 1 !

For me, the signs that a bull market for a day may be upon us started when, at 3 p.m. the day before, Todd Harrison said that he was taking off his bear suit. I'm a huge believer in the hot hand, and going into Thursday's session nobody in this country had a hotter hand than Todd "Cookie Puss" Harrison. Nobody. In fact, when he pronounced that he was no longer bearish, we convened a special meeting and brought in all our massive short positions. We went long some; it's all fully documented on the site.

There were just enough high profile earnings that night that if the earnings were good -- and all indications from our homework indicated they would be -- we could have a combustible cocktail of short-term oversold, good news on an earnings front, and an absence of bad news on a macro front that could prove to be explosive.

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Ah, even as I write this, I can see the emails: "If you were so sure, why didn't you hit me over the head with a two-by-four and tell me to buy?" And of course, the answer is that that is not what I do. I tell you what I'm doing; I don't tell you what you should do. That's what brokers and advisers do. I'm doing something I think is far more valuable, telling you in real time, what I, a guy who has made millions in the market, is actually doing. At that moment we were furiously covering our shorts. Every one of them. Every one that enabled us to make money all week, all month.

Why didn't we go massively long? Why didn't we write that we went massively long? Because we were already up so much that the risk/reward for being wrong if Palestine exploded or if another terrorist attack wracked either Israel or our great country, or because Saddam Hussein said one thing and then did another, a la the amazingly diabolical things Hitler did to the allies in the '30s, then how will I explain myself to my partners, both internally and externally? How do I explain how we risked our year on a hunch? What kind of moron do you think I am?

You think we developed a valuable franchise over the course of 14 years by throwing the ball on fourth down with 30 seconds left in the game and no time-outs for the bad guys? You think I don't think about the Miracle in the Meadowlands when Herman Edwards of my glorious Eagles took a Pisarcik fumble in for the winning score?

Sure I come to play every day. But I also have constraints, business constraints that aren't going to go away.

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James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to send comments on his column to James J. Cramer .