Cramer's 'Mad Money' Recap: Sept. 2

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"The rally this morning was the real deal," Jim Cramer told viewers of his "Mad Money" TV show Tuesday.

He said that market expectations have turned too negative and when companies report their earnings they should blow away those estimates. Cramer said he was buying into today's afternoon selloff for his charitable trust Action Alerts PLUS and said now is the time to start building positions.

Cramer told viewers not to pay any attention to the Dow Jones Industrial Average, which traded as high as 230 points before closing down 26.63 points today.

Instead he said they should concentrate on the KBW Bank Index and Philadelphia Housing Sector Index, which he says are the real indicators of where the market is headed.

He said the markets will not see a meaningful rally with the Philadelphia Housing Sector Index in free fall. "The markets need home prices to stabilize," he said.

Cramer reiterated his views that the markets will not re-test the lows of July 15, noting his prediction of a bottom in the housing market is now just 302 days away. He said a market rally will likely precede that bottom.

Cramer cited several reasons why he feels a market rally is on the horizon. First, there will be an uptick in consumer spending when gasoline hits just $3 a gallon. Second, the Federal Reserve won't raise interest rates as long as commodity prices continue to fall.

Finally, any companies who raised prices due to higher commodity costs will now reap the rewards as those commodities begin to recede in price.

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