Some stocks speak in muted tones with their trading. Others are blinding beacons about where their company is going. Still others grab you with every sense and scream and stomp on you about the state of the markets as a whole.
That's the kind that the stock of
Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) is, the best bellwether I know for the market. (Remember, the term bellwether comes from the goat that wears the bell that others follow.)
This morning Merrill Lynch hit its high, moving up strongly after reporting much better-than-expected earnings. I can't think of a more literal and more vigorous sign for the overall health of this market than the strength in Mother Merrill.
Merrill's hitting a 52-week high signals, among other things:
An improving environment for securities in general. A robust money-raising environment for brokerages. Continued low inflation, as Merrill is the ultimate financial. A potential turnaround in the bond markets, in which Merrill's a huge factor. A potential turnaround in the equity underwriting, which hasn't been Merrill's strongpoint lately but can easily turn, depending upon the fortunes of the corporate finance department. Most important: lower rates, including lower short rates; in other words, more cuts in rates by the Fed.
Merrill's stock signaled the downturn in the 1998 slide for financials. Merrill's stock helped forecast the 1995 revival in the financials. And Merrill's stock jumped up and down and beat you around the head to buy the market in 1982, when the great bull market began.
This stock doesn't speak idly. To ignore it is a giant mistake. It is signaling buy, for it and for the market.
Jim Cramer
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