The market was hit with a huge wave of selling over the past few days, Jim Cramer told his Mad Money viewers Wednesday. But today, that selling suddenly stopped and the bulls ran right back in and started buying.
Cramer said it's not surprising that the market bounced after three days of brutal selling. That's how selloffs typically work. But what was remarkable about today's session was the breadth of the rally. Technology was hit hard last week, so you'd expect that sector to bounce. But in addition to software and semiconductors, we also saw strength in retail and the rails.
Strong earnings from Qorvo (QRVO) - Get Report will spark a rally in the semiconductors, Cramer said, with Skyworks Solutions (SWKS) - Get Report, Nvidia (NVDA) - Get Report, Advanced Micro Devices (AMD) - Get Report and Broadcom (AVGO) - Get Report among his favorites. With Qorvo selling lots of chips, that should be good news for Apple (AAPL) - Get Report, Cramer added.
Adobe Systems (ADBE) - Get Report received two analyst upgrades today, which should bode well for the cloud stocks like Service Now (NOW) - Get Report, Wix (WIX) - Get Report and Shopify (SHOP) - Get Report. He was also bullish on Microsoft (MSFT) - Get Report, which is expected to boost its dividend.
Look for all of these groups to continue their march higher tomorrow, Cramer concluded.
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Off the Charts
September has not been kind to the stock market, historically. That's why Cramer checked in with colleague Carley Garner in his "Off The Charts" segment, to see where stocks might be headed next.
Garner felt investors need to get more cautious, as the market's incredible rally off of their March lows may be running out of steam. She first looked at a chart comparing the S&P 500 against the Nasdaq 100 index. She noted that the Nasdaq got hit less by the pandemic than the S&P, but the S&P's recovery has been more orderly.
What gave Garner pause was the market's relative strength indicator, or RSI. She noted both indices have seen strong rallies recently without a rise in the RSI. Similar patterns were seen in 2018 and 2019, during which the markets needed ample time to digest its gains.
Garner indicated a floor of support for the S&P at 3,280. She felt if that level holds, the index could make one more rally, possibly to 3,660 where it will meet a strong ceiling of resistance and likely fail.
Executive Decision: Ulta Beauty
Dillon said she's glad the company invested in its digital strategy, as it's been paying off during the pandemic. Sales are up at both the website and on the app. Customers are also loving their new skincare analysis tool, which uses augmented reality and artificial intelligence to provide personalized recommendations.
When asked for more color on the digital strategy, Dillon said that while there's no substitute for in-person recommendations and interactions, digital is certainly the future of retail and retailers need to start evolving.
As for their in-store experience, Dillon said guests are returning to stores, and while they are coming less frequently, they're buying more and are utilizing new services like curbside pickup.
Executive Decision: Coupa Software
For his second "Executive Decision" segment, Cramer also spoke with Rob Bernshteyn, CEO of Coupa Software (COUP) - Get Report, the spending management software provider that saw its shares fall despite posting a strong quarter.
Bernshteyn said he was proud of the results this quarter, as the company was able to reduce implementation times and increase overall operational efficiency. He said spend management remains a critical area for most businesses, especially as they cope with supply chain disruptions around the globe.
When asked about those disruptions, Bernshteyn explained that many companies are using Coupa's community intelligence to diversify their supply chains and optimize their spending. Many companies are switching from single-source to multi-source and are renegotiating to deal with changing conditions.
Not all industries are being affected equally by the pandemic, Bernshteyn said. Spending in hospitality has fallen by 50%, while spending on telecom has increased as more people are working remotely.
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You Don't Need a Crystal Ball
In his "No Huddle Offense" segment, Cramer said you don't need a crystal ball to invest in this turbulent market, just a diversified portfolio. What does diversification look like in a COVID-19 world? First, Cramer said, you need a cheap index fund that mirrors the S&P 500. After that, you need stocks with reasonable valuation when compared to their growth rate. He recommended names like Bristol-Myers Squibb (BMY) - Get Report, Costco (COST) - Get Report and DuPont (DD) - Get Report.
Next, Cramer said investors should be looking for stocks that seem overvalued now, but are actually cheap in their "out years," or future earnings. Companies like Zoom Video (ZM) - Get Report, CrowdStrike (CRWD) - Get Report and Lululemon Athletica (LULU) - Get Report fit this category.
Finally, Cramer said investors must have cash in their portfolio so they're ready to buy when the next opportunity arises.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Wednesday evening:
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At the time of publication, Cramer's Action Alerts PLUS had a position AAPL. MSFT, NVDA, AMD, BMY, COST.