Cramer's 'Mad Money' Recap: Anatomy of a Bull Market (Final)

Click here for an archive of Jim Cramer's Mad Money recaps. Click here to get Jim Cramer's Mad Money Post Game video exclusively on TheStreet.com.

---

Editor's Note: This recap was last published on Sept. 9, 2009.

NEW YORK (TheStreet) -- "When you're in the midst of a bull market, you need to take advantage of it and use it to the fullest extent possible," Jim Cramer told the viewers of his "Mad Money" TV show Wednesday.

He said that by dissecting a bull market and understanding how it works, investors can avoid being misled by the often confusing media and focus on what matters most.

Cramer said the first thing investors need to know is that bull markets are all about leadership. He said that every bull market is lead by a sector or sectors that drive it higher. Identify the leaders, said Cramer, and you'll identify the winners.

How do you identify the leaders? Cramer said they're the first groups to rally off the bottom, and often rally hard in a "V" shaped pattern. These are the stocks that start roaring right from the opening bell. Once these leading stocks and sectors take off, the rest of the market will follow, he said.

But leaders do more than just begin bull markets, said Cramer, they also begin corrections as well. He said that typically the leaders will roll over first, with the rest of the markets again following suit. It's at this point, he said, the media will forecast doom and gloom and novice investors panic and sell. But that's a mistake, since these pullbacks are the best time to buy back into the leaders.

Cramer said pullbacks are buying opportunities, if investors know which stocks to buy. He said not to be faked out by pullbacks and the media's reaction to them. Instead, he said, use the opportunity to get back into the leaders, and watch how quickly they recover.