Drat, we didn't crash. Really, yesterday we had our best chance to flush out the weak hands that dominate this market. We didn't get rid of the hedge fund sellers of the brokerage stocks -- now bailed out by Goldman Sachs'
(GS)
numbers, which were pretty fabulous, despite last-minute rumors that they would be terrible. We didn't get the sellers of the oil stocks that would make them stabilize; in fact, they appeared en masse with a $4 crack in the commodity. We didn't get the down 500-point capitulation crescendo that would make it so it would be safe to buy an Apple
(AAPL)
, which I think has bottomed, but which I -- like everyone else -- worry could still go down more, or a Research In Motion
(RIMM)
, which I think is doing well.
Now, it is possible that what we did get was a test of a decline and a hold. That's the most positive interpretation, and I want to believe that there is now a possibility of a real bottom. The Bear
(BSC)
shock did create panic. It also showed you that there is a way out of a collapse; if we were to get one for all but the biggest bank, Citigroup
(C)
. It showed we can find a way out of a National City
(NCC)
or a CIT
(CIT)
. We also could get a real cut from the Fed, 100 basis points, that will make a difference. I just question whether the panic was deep and long enough to get rid of those who have challenged us by selling into every rally. I just wonder whether any shorts covered and whether they won't be right back again after a little lift.
But what I really think we got was the oversold bounce, the endless oversold bounce that happens every time we get to minus-5 on the oscillator. This oscillator bounce is pretty much etched in stone as a truism, once again stopping a crash, as it has done every time since the 1987 crash when the oscillator betrayed us the week before, a terrible week that turned out to be just a prelude to a much worse one.
If we HAD gotten the capitulation, I would have said that's about a 75% chance of a real bottom. That means the action yesterday and today is just prolonging the pain.
We need to get in shape, and get out the weak hands because some stocks like Washington Mutual
(WM)
and Nat City and firms like E*Trade
(ETFC)
and CIT seem like they are really rolling over, and I want to know if the market is ready for those if they fail. Is the market even ready for a Downey
(DSL)
to close, given it has 10% nonperformings. Is the market ready if Bank of America
(BAC)
walks away from Countrywide
(CFC)
or if Wachovia
(WB)
cuts its dividend. How about, for heaven's sake, a Citigroup problem of a big magnitude?
Here's what I think will occur: We bounce, the futures lead us, people get bullish again until the next bad event, and we just keep replaying things.
It does seem like we have hit a bottom for many stocks in the good economy, but without that whoosh, that crescendo, I believe there are tons of weak holders that are just waiting to get out and tons of shorts getting ready to lean again after any lift.
I look at so many stocks right now and I think, "Hmm, they have held": Caterpillar
(CAT)
, Procter & Gamble
(PG)
, IBM
(IBM)
, Verizon
(VZ)
, Du Pont
(DD)
, JPMorgan
(JPM)
, AT&T
(T)
, GE
(GE)
, McDonald's
(MCD)
, Chevron
(CVX)
, Disney
(DIS)
, Wal-Mart
(WMT)
, tons of Dow stocks.
Again, though, the lack of a disastrous market yesterday says to me we still have hedge fund and mutual fund redemptions that will push down stocks once we are no longer oversold.
That means, enjoy the bounce but when we get to the next overbought level, you have to trim inventory again, because even though we will have lower cash rates, courtesy of the Fed, we will NOT have good earnings and we will not have strong hands. That means more up-and-down action with more stocks ending down than up, particularly in the ever-declining financial sector.
Random musings: As I told subscribers of Action Alerts PLUS this morning, everyone knew the "new" negative on Schering-Plough
(SGP)
this morning from the 8-K. What people don't know is the future, and SGP said there is some stabilization. ... Doug's piece on Greg is an extraordinary must-read.
At the time of publication, Cramer was long Goldman Sachs, McDonald's, Verizon and Schering-Plough, and was long GE as part of his contract with CNBC.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.
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