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NEW YORK ( TheStreet) -- The pattern worked again, Jim Cramer told "Mad Money" viewers Wednesday as the markets sold off on the latest words from the Federal Reserve.
Cramer said the markets have been following a predictable pattern around the last few Fed meetings. It goes something like this:
In the days leading up to a Fed meeting, the markets tend to rally as they presume the economy is too weak to stand on its own and the Fed will continue its bond-buying programs to keep interest rates low.Why does the Fed want rates low? Because that gives companies incentives to expand and hire more workers. It ignites the housing market with low interest rates. It helps companies refinance their debt to free up more cash for buybacks and dividend boosts. All of these things are good for stocks, and the market is happy to embrace a friendly Federal Reserve. But then the day of the Fed meeting arrives and investors hear, as if for the first time, that the economy is weak and the Fed has no choice but to keep buying bonds to keep things afloat. This "news" brings in waves of sellers, sending the market sharply lower -- as it did today. However, in the days after a Fed meeting, the pattern continues. Cooler heads prevail, realizing the Fed is once again our friend and -- oh, look! -- stocks just got a whole lot cheaper. Thus, the buying begins once again. Cramer still thinks now is a good time to lock in profits so investors can be ready for when the next rally is ready to begin.