Hedge Funds Make Retail a Booby-Trap

Has retail simply been captured by the hedge funds? Last night as J. Crew (JCG - commentary - Cramer's Take) disappeared from the realm of "safe" retailers, at the same time that Big Lots (BIG - commentary - Cramer's Take) and Zumiez (ZUMZ - commentary - Cramer's Take) ramped, I saw once again that this group is simply being gamed by hedge funds on a daily basis.

Mind you, that doesn't mean that it is fixed. It does mean that everything is crowded. Consider Men's Wearhouse (MW - commentary - Cramer's Take). It cut its guidance last night, and the next thing you know, it's down $2.45. Awful. That's still excessive volatility caused by hedge fund maneuvering -- too many longs looking for a turn.

You saw the same thing with Liz Claiborne (LIZ - commentary - Cramer's Take) earlier in the month. It reported a terrible quarter and went up -- too many shorts. The pattern was repeated with Coldwater Creek (CWTR - commentary - Cramer's Take), which wasn't bad enough to go down. Or Chico's (CHS - commentary - Cramer's Take). But Costco (COST - commentary - Cramer's Take), which was really good, and before that Urban Outfitters (URBN - commentary - Cramer's Take), the same, get hit. You got this in Bed Bath & Beyond (BBBY - commentary - Cramer's Take) earlier too.

Ralph Lauren (RL - commentary - Cramer's Take) and Coach (COH - commentary - Cramer's Take) and Tiffany (TIF - commentary - Cramer's Take) were all pretty good, but the reaction was great because there were way too many shorts who were betting that things were falling apart on the high end, a judgment that was just plain wrong.

All of these have too many players in them. The only consistently up-players have been Ross Stores (ROST - commentary - Cramer's Take), Big Lots and Wal-Mart (WMT - commentary - Cramer's Take). (Helene Meisler's great technical product isolated these ahead of time.)

To me, find one you are comfortable with. I found Wal-Mart for Action Alerts PLUS, and I really think it creeps much higher.

Otherwise, the group is just plain too volatile to handle.

Random musings: I continue to believe that Doug's call here on the banks -- particularly Citigroup (C - commentary - Cramer's Take) -- must be watched if not acted upon. I have made my biggest money when someone who has been dead right about a short switches direction, because he is the only clear hand in the bunch. ... New highs dwarfing new lows. Kind of compelling, given the chaos in the financials.

At the time of publication, Cramer was long Wal-Mart.

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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. 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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