When the market rebounds, investors have questions, Jim Cramer told his Mad Money viewers Monday. Is the move for real? Will it last?
Cramer said investors often confuse a simple oversold bounce with a sustained rally, and knowing the difference is crucial.
Cramer said Monday's move was a classic bear-market rally, the kind that's always seen when the market is oversold. The proprietary Standard & Poors Oscillator that Cramer follows hit minus five last week, a clear indication that the selling was too fast and too furious. Even with today's rally, the markets could still bounced another 3% to 4% before resuming their trend lower.
What would make today's move a sustainable one? Cramer said any thawing of trade relations would be one catalyst. But if the president's tariffs on China balloon from 10% to 25%, as they're expected to, that would be bad for all consumers.
Oil could be another catalyst for the bulls. It seems like $50 a barrel may be a key level for oil, one that would lead to lower prices at the pump.
The Federal Reserve is another wildcard for the markets. Fed Chair Jay Powell will speak on Wednesday, and if he adopts a "one and hold" stance on interest rates, it would be gold for the markets.
Finally, Cramer noted that events in Europe, like Brexit and Italy may help weaken the U.S. dollar, something that would bolster many of our industrial and international companies.
A Catalyst for United Technologies
Cramer said the approval marks a big catalyst for United Technologies, which now plans to split itself into three divisions, elevators, HVAC and aerospace. The aerospace is the most intriguing of the three, Cramer noted, as the growing global middle class is creating an insatiable demand for more plane.
But while the approval is great news, United Technologies is still vulnerable to several headwinds, including steel and aluminum tariffs, rising interest rates and China, which is the company's third largest market and its fastest growing.
Cramer said many of these negatives are already built into the stock, while none of the positives are, which makes owning shares that these levels a great idea.
Retail Stocks to Watch For -- And to Watch Out For
The retail stocks are down big over the past several weeks, but Cramer told viewers there are a few high quality names worth looking into. He said Macy's (M - Get Report) is down big from its summer highs, despite delivering better-than-expected revenues, earnings and same store sales when it last reported. The retailer is also closing underperforming stores and paying down debt, making its multiple of just nine times earnings a bargain.
Kohls (KSS - Get Report) is another stock that's off 19% from its recent highs. Cramer said this company is taking market share, has great brands and has a partnership with Amazon (AMZN - Get Report) to boot. The stock is dirt cheap at just 11 times earnings, down from 14 times, and offers a 3.7% dividend.
Finally there's Target (TGT - Get Report) , which posted a modest miss last week when it reported. Cramer said the estimates had simply gotten too high for Target, but the company continues to deliver, especially in digital. Shares now trade for 12 times earnings.
As for stocks to avoid, Cramer called out L Brands (LB - Get Report) which posted a dismal quarter that included a slashing of its dividend. Cramer said the company was right to cut the dividend but he needs to see results before recommending it.
Finally, Cramer said the selling in Amazon has certainly been overdone and he'd be a buyer at these depressed levels.
Executive Decision: Planet Fitness
Rondeau said that Planet Fitness has delivered 47 consecutive quarters of positive same-store sales growth, in all sorts of economic environments, and this year will be no different. The company has 12.1 million members, up from just seven million three years ago. While Planet Fitness has 1,600 locations today, Rondeau said they could have 4,000 before reaching saturation.
One of the company's keys to success are its franchisees. Rondeau said they have great franchise partners that are happy to have more locations in their portfolios. Planet Fitness has proved a great business model for franchisees.
As for the company's members, they appreciate the company's commitment to keeping their locations fresh, replacing equipment at least once every five years so everything stays looking, and working, like new.
In his "No-Huddle Offense" segment, Cramer said the question investors need to be asking is not whether a bear market has begun, but when it will end. He said the decline in stocks has been quick and ferocious.
Shares of Nvidia (NVDA - Get Report) are not seeing a reset in valuation, they're seeing an astounding decline. Shares of General Electric (GE - Get Report) , once the world's more valuable company, are off 56% for the year with no signs of stopping. Goldman Sachs (GS - Get Report) has seen massive declines. Celgene (CELG - Get Report) now trades at just 3.6 times earnings.
All of these declines prove we're already in a bear market, Cramer concluded. The real question of when it will end is still unanswered.
Cramer was bearish on Orion Engineered Carbons (OEC - Get Report) , Marathon Petroleum (MPC - Get Report) , Caesars Entertainment (CZR - Get Report) , Brookfield Renewable Partners (BEP - Get Report) , iQIYI (IQ) and Stanley Black & Decker (SWK - Get Report) .
Join Jim Cramer's Action Alerts PLUS club for investors on Cyber Monday and get our best deal of the year!
Action Alerts PLUS members enjoy:
- A complete list of all stocks in Jim's investment portfolio, which he runs for charity.
- E-mail alerts before Jim makes any trade for the portfolio, so that you can not only trade along with Jim, but actually place your order before he does.
- Access to a private monthly video conference call for club members only, in which Jim answers questions and updates you on his latest thinking.
- Exclusive commentary throughout every trading day from Jim and his personal team of analysts, who let you see the research that Jim uses in making his own trading decisions.
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.
To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.