In the "Off The Charts" segment, Cramer went head to head with colleague John Roque over the charts of the financial stocks, a sector that was showing signs of life after the election, but has now once again taken a turn for the worse.
According to Roque, when looking at a chart comparing the performance of the financials versus the S&P 500 it's clear to see that the financials have broken down over the past few weeks, sliding below their 40-week moving average.
Roque also noted that the financials still make up 15% of the S&P, while historically they've only accounted for 12% of the average. Roque felt that the financials will sink below that historical average before beginning to recover.Cramer also cast doubts over the group, saying that year end selling pressure buy hedge funds and mutual funds will wreck havoc over the group until January. He said investors are tired of losing money, and there's a widespread belief that the banks still need more capital to be on a solid footing. He said without a catalyst, there is little to like about the banks. What does all this mean for the broader markets? Cramer said that looking at a longer term chart, going all the way back to 1994, it's clear that the broader markets can rally, even if the financials are not. In 1999, for example, the financials underperformed, but the markets rallied. In April, 2007, the markets rallied for three months after the financials took a nosedive. But Cramer noted that eventually the markets will need leadership from the financials. He said he may have to change his stance on the markets come January if the banks are not showing at least a glimmer of hope for the new year.
Fabulous FADS CAN"The mechanics of the market are on your side," Cramer told viewers. He said with so many hedge funds and mutual funds trailing the averages, they'll be piling into the momentum stocks from now until year's end, trying to close that gap. Cramer said that's just one more reason to own his "FADS CAN" portfolio of the best secular growth names, stocks like F5 Networks (FFIV), Apple (AAPL), which he also owns for his Action Alerts PLUS portfolio, Deckers Outdoor (DECK) and Chipotle Mexican Grill (CMG). Still need more reasons to own these names? Cramer said Oprah endorsed three of them when she added products from Apple, Deckers and Netflix (NFLX) to he "favorite things" for 2010. Cramer said the key to any portfolio is flexibility, that's why he added F5 and Amazon.com (AMZN) to list and replaced Intuitive Surgical (ISRG) and Express Scripts (ESRX) three weeks ago. He said since that change, Amazon and F5 are up on average 11%, while Intuitive and Express Scripts are down 1% along with the major averages. Cramer told investors they too need to stay active and follow their winners into years end. He said never be afraid to let the losers go.
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