Cramer's TheStreet.com TV
TheStreet.com TV Recap: How to Spot Bottoms
TheStreet.com Staff
02/28/07 - 02:03 PM EST
On TheStreet.com TV's Wall St. Confidential video Wednesday, Jim Cramer mused about some of his strategies for spotting a bottom a day after a market meltdown.
"There have been only two days in my 25-year trading career where you simply had to buy the next day, no matter what," he told Gregg Greenberg, the host of Wall St. Confidential. "We have to remember what history tells us here."
The first day was "Terrible Tuesday" during the crash of 1987, when the market was down 1,200 points. The second was in October 1997 during the "Asian contagion," Cramer said.
In the first case, the market's fall was because of a technical problem, a breakdown similar to the one the market had yesterday, Cramer said, and the second one was a recognition that Asia was not the U.S.
Players who wade into today's tape should want to be in a bifurcated portfolio: hit the stocks with 4% yields and the stocks that are selling below 10 times earnings, Cramer said.
"One third of the market bottoms immediately," he explained. "If there is an economic speed-up and this was a reaction to interest rates going higher and bonds going down, you would buy cyclicals."
However, because this is a situation in which interest rates are going down and the economy is softening, another group that might have bottomed here is the Procter & Gamble (PG Quote - Cramer on PG - Stock Picks) contingent, Cramer said.
He believes Colgate (CL Quote - Cramer on CL - Stock Picks), Clorox (CLX Quote - Cramer on CLX - Stock Picks), Campbell (CPB Quote - Cramer on CPB - Stock Picks), Kellogg (K Quote - Cramer on K - Stock Picks) and Altria (MO Quote - Cramer on MO - Stock Picks) should all "work for now."
The second bottoming should be in the financials, Cramer said, which is why he has been trying to have people set up positions in the "dividend defensive" financials, and secondly, the more aggressive financials with "good yield or good book."
Editor's note: Jim posted several videos about the market today. Check them out by clicking on the links below.
How to Spot Market Bottoms
Bears Are Gaming the Buybacks
Check Out This Options Trade on Tech
Get Bullish on Broker Stocks
Buy the Soups, Soaps and Smokes