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Cramer said that for many sectors and companies, the markets are working as they should, sending stocks higher as estimates rise and lower on disappointments. Macy's (M) and Home Depot (HD), both Action Alerts PLUS holdings, saw their shares rally on disappointments, but no one expected these retailers to do well, which made "less bad" good enough.
On the other hand, the markets continue to be irrational with stocks like Netflix (NFLX), LinkedIn (LNKD) and Tesla Motors (TSLA), said Cramer. He said Netflix needs a serious rest, while Tesla only gets more and more concerning.
"I'm not a bear," Cramer concluded, but he is concerned with these irrational areas of the market. If the irrational takes over from the rational, he said, then we'll have a serious problem.
A Two-Track Market
We have a two-track market, Cramer told viewers. On one track there are the rational stocks, while on the other there are stocks like Tesla, which on Tuesday rose over 13% after an analyst doubled his price target on the electric car maker from $153 to $320 a share.
Cramer said the analyst making the call has indeed been right about Tesla thus far, but in order to meet these lofty valuations Tesla would need to expand battery production at a near-mythological pace.
Cramer said this bold Tesla call reminded him of the "dot-bomb" era, when on Dec. 20, 1999, an analyst made a bold call on Qualcomm (QCOM), raising his target from $500 to $1,000. Shortly thereafter, the Nasdaq collapsed, and it took Qualcomm over 10 years to see its stock recover to that $500 level.