Some days, the market just doesn't want to go lower, Jim Cramer told his Mad Money viewers Tuesday. On Monday, it looked like the "strong, but not stellar" results from Netflix (NFLX) - Get Report were poised to crater the Nasdaq, but today, both the stock and the Nasdaq were able to rally.
Investors have never gone wrong buying Netflix on the dips, and today was no exception. As analysts began picking through the company's earnings, it became clear that perhaps the only thing wrong with Netflix was the company's ability to accurately forecast its own growth.
But even as Netflix began weighing on the averages this morning, Cramer said there was another force at work, the "ETF effect." Netflix has been lumped in with the other FANG stocks in a number of high-profile ETFs, Cramer explained, making them an "all for one and one for all" trading proposition most of the time. The ETF effect cuts both way however, and while investors were beginning to nibble on Netflix, Amazon (AMZN) - Get Report saved the day by announcing that it's Prime Day launch problems were not a concern, and sales were better than ever.
In the end, Cramer said that both Netflix and Amazon have amazing track records, and betting against them is often foolish. That's why despite the downward pull of yesterday, the markets made up their own mind today and headed higher.
Cramer and the AAP team are taking a different look at the markets through the lens of charting analysis. Find out what they're telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts PLUS.
Goldilocks Retail Stocks
With many investors fretting over trade and tariffs, the domestic retail stocks have been heating up. But Cramer told viewers that among the three big players in the home goods category, one is too hot, one too cold and the third is just right.
Bed Bath & Beyond (BBBY) - Get Report has been the laggard in the space, with shares down 75% from their 2014 highs. The company continues to get eaten alive by online retailers and its turnaround has yet to materialize. When Bed Bath last reported, the company saw both declining same-store sales and declining gross margins. Not even the company's monster stock buyback program, which has retired 38% of its shares, has been enough to turn the ship around.
Then there's Wayfair (W) - Get Report , the red hot online-only retailer with shares up 129% in 2017 and another 55% so far this year. Cramer said Wayfair is the opposite of Bed Bath and Beyond -- which makes it simply too risky to buy. He said shares trade at 14 times sales, as the company is not yet profitable, and that means any change in its trajectory could be catastrophic.
Finally, there's Williams-Sonoma (WSM) - Get Report , the home goods retailer that's "just right" according to Cramer. The company has a number of great high-end brands, a thriving online business which now accounts for 53% of sales, and shares that trade for just 14 times earnings, not sales.
Cramer said he'd avoid both Wayfair and Bed Bath and Beyond and instead focus on what's working and that's Williams-Sonoma.
Apparel Stocks Rising
A rising tide may lift all retail boats, but some of those boats are more seaworthy than others, Cramer told viewers. That's been the case with three of the hottest apparel plays lately, Canada Goose (GOOS) - Get Report , Lululemon Athletica (LULU) - Get Report and Urban Outfitters (URBN) - Get Report .
Cramer said he was wrong to advise taking profits in Canada goose earlier this year. While the company did issue a secondary offering of stock which caused shares to fall 10%, the deal was absorbed a lot better than he expected and the stock continues to rise. Cramer said he'd be a buyer into any weakness.
Lululemon hasn't had a CEO since February, but it doesn't seem to matter, as shares have soared from $77 to $129 after not one, but two, blowout quarters in a row. Online traffic and sales are up and Lulu continues to innovate with new products that customers love. Cramer said shares are expensive at 35 times earnings, but he'd put the company on his shopping list for any market-induced weakness.
Finally, Cramer said, that after being left for dead a few years ago, a changing economy and changing fashions have resurrected Urban Outfitters, which has delivered four great quarters in a row, capped off by last quarter's 10% rise in same-store sales. Cramer said he's a buyer.
Off the Charts: Biotech
In the "Off The Charts" segment, Cramer checked in with colleague Bob Lang over the charts of three biotech and biomedical names that have been heading higher.
Lang first looked at a daily chart of Gilead Sciences (GILD) - Get Report , which despite a rough two years has been making a series of higher highs and lows, with a positive Chaikin Money Flow and strong Relative Strength Indicator.
Lang next looked at Celgene (CELG) - Get Report , which is off 20% for the year but also beginning to show signs of life. Lang noted the Chaikin turning positive, indicating buyer are starting to step in. He felt a return to the stock's 200-day moving average could be possible.
Finally, Lang looked at Illumina (ILMN) - Get Report , a stock with a beautiful chart that's been steadily marching higher. He noted both the Chaikin and MACD as being strong, with only the relative strength indicator giving him pause for such an overbought condition. He advised buying this one only on weakness.
To see the charts and get more of Cramer and Lang's analysis, read Biotech's Coming Back to Life: Cramer's 'Off the Charts'.
In his "No-Huddle Offense" segment, Cramer said Federal Reserve Chairman Powell has become a force for the bulls, allowing multiple sectors to rally all at the same time.
Cramer explained that the defensive stocks like Johnson & Johnson (JNJ) - Get Report are rallying because a flattening interest rate curve "always" means a recession is looming just around the corner. But, according to Powell, economic conditions still favor growth, which is why cyclical stocks like Honeywell (HON) - Get Report , an Action Alerts PLUS holding, are also able to rally. Finally, the home builders like Lennar (LEN) - Get Report , are rallying because interest rates remain low enough for home buyers to still be interested in taking out mortgages.
Cramer said these three groups should never rally at the same time, but thanks to Powell's measured and balanced approach, in this economy, they can.
In the Lightning Round, Cramer was bullish on ForeScout (FSCT) - Get Report , Proofpoint (PFPT) - Get Report , Palo Alto Networks (PANW) - Get Report , Applied Materials (AMAT) - Get Report , Cardinal Health (CAH) - Get Report and Illinois Tool Works (ITW) - Get Report .
Over on Real Money, Cramer says ETFs are pulling down the FANG stocks after Netflix messes up new-sub predictions. Get more of his insights with a free trial subscription to Real Money.
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At the time of publication, Cramer's Action Alerts PLUS had a position in AMZN, ITW, HON.