Cramer: Banks Are Vital to the Market's Psyche

This column originally posted on RealMoney.com at 6:57 a.m. EST. For more information about subscribing to RealMoney, please click here.

You never want to buck the financials. I have said over and over again that the group is too important to let go. Can we really envision a world without Citigroup(C) and Bank of America(BAC) common stock? Can we envision a world where PNC(PNC) and Bank of New York(BK) and State Street (STT) are no more? A world where Wells Fargo (WFC) and JPMorgan(JPM) don't make it?

It's funny when you put it that way, because we know that if those stocks weren't in the S&P 500, if we just took them out, we would be feeling like we should be buying, buying, and buying judging from the very nice pullbacks we have had to above the lows of October and November now that we are oversold.

Tons of charts, from Forest Labs (FRX) to AT&T(T), from Disney(DIS) to Eaton(ETN), all sorts of charts from all sorts of industries, charts like Caterpillar(CAT) and BP (BP) and Nucor(NUE), if they hold here, will embolden people to come in. As will IBM(IBM) on Wednesday.

The problem is those banks and what they mean to the psyche of the market. We know, for example, that the government's not going to let any fail because Tim Geithner, who will be approved, knows (without ever admitting it) that when Lehman went under, we began to get the sickening sound of an industry cascading, one that now has banks down 50% from where they were before the Troubled Assets Relief Program money began to be distributed.

At the same time, not all of the bank stocks have been created equally. The banks that have not taken out their lows -- Goldman Sachs (GS) and Morgan Stanley(MS) -- are in particularly good shape compared with then, because they have much less to no mortgage exposure, although GS and MS were trading as if they have huge exposure to the custodian banks like State Street.