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Rally With Caution: Cramer's 'Mad Money' Recap (Tuesday 2/4/20)

Jim Cramer has his reservations about news on the coronavirus and the Chinese economy, and says investors should approach this rally with caution.
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Don't get ahead of this rally, Jim Cramer cautioned his Mad Money viewers Tuesday. Days like this are opportunities to take profits and raise some cash. Investors shouldn't assume the worst is entirely behind us.

Cramer admitted that there was a new level of confidence when the Centers for Disease Control provided the latest updates on the coronavirus. Last week we knew little about detection or treatment options. This week, we know more but we're not out of the woods yet, and Cramer says he still has reservations about this relief rally and the stock market. 

Tuesday's positive news is giving investors a false sense of security, he said. The Chinese economy might not bounce back as quickly as many people hope. Then there are bond prices. The Chinese have been adding stimulus to their economy, causing a flight to quality in U.S. bonds, but that trend might soon end. 

Investors have also become hopeful of a cure or vaccine for the coronavirus, but that might not come as fast as many hope, if it comes at all. 

Cramer also had concerns about earnings and investors' assumptions about the U.S. economy. While the economy has been strong, the rest of the world isn't necessarily on a solid footing. 

Finally, Cramer said, there are political implications to consider. The president's acquittal in the Senate impeachment trial and any disarray in the Democratic primaries could have a short-term impact on stocks.

Cramer and the AAP team are looking at everything from earnings and tariffs to the Federal Reserve. 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.

Where did the Shorts go?

All of those short sellers from last week are nowhere to be found this week, Cramer told viewers. That's because all of the hedge funds that shorted into the coronavirus panic on Friday got blown out the water. 

Many shorts were betting the Chinese economy would tank on the spreading coronavirus outbreak, but they didn't count on the huge stimulus the Chinese have been using to boost their economy. Few shorts predicted Chinese factories would be back to work next week, but that's likely what will happen.

There are plenty of individual shorts that also went awry. Many short sellers bet against the casino stocks, but they simply didn't go down. They also bet against Nike  (NKE) - Get Free Report, which rallied another 2.1% Tuesday. Clorox  (CLX) - Get Free Report was able to deliver better-than-expected results that sent shares up 4.9%. Even apparel maker Ralph Lauren  (RL) - Get Free Report was able to send the short sellers heading for the hills. 

Finally, there's the ultimate short-selling victory, Tesla  (TSLA) - Get Free Report, which rose another 13.7% Tuesday as the company claimed victory over negativity.

On Real Money, Cramer keys in on the companies and CEOs he knows best. Get more of his insights with a free trial subscription to Real Money.

Executive Decision: Chipotle Mexican Grill

For his "Executive Decision" segment, Cramer spoke with Jack Hartung, CFO of Chipotle Mexican Grill  (CMG) - Get Free Report, the restaurant chain that just posted a 13-cents-a-share earnings beat and same store-sales that rose 13.4%. 

Hartung said Chipotle's loyalty program is going strong but is really only just getting started. He said they're not yet offering any personalized services through the program, but when they do, they expect it to become even more popular. Chipotle's goal is to make it more convenient for customers to enjoy their food, which is why they're doubling down on pickup, delivery and even drive-up windows where customers can get food quickly. 

When asked about delivery, Hartung said Chipotle is open to expanding with new partners, but it needs to be the right partner, one that can deliver an end-to-end customer experience they will be proud of. 

Finally, when asked if there is still room for more Chipotles, Hartung said their 5,500 store target is only just the beginning as they experiment with new locations and different store formats. 

Executive Decision: Centene

In his second "Executive Decision" segment, Cramer again sat down with Michael Neidorff, chairman and CEO of Centene  (CNC) - Get Free Report, the health plan provider with shares that are up over 50% in just the past four months. 

Neidorff started off by saying that while a single-payer healthcare system makes for a great soundbite for politicians, our country simply cannot afford it, which makes it a non-issue for Centene. Additionally, he said the only way a single-payer system saves money is to withhold services, which is not something Americans will tolerate. 

Neidorff said that Centene is still not a household name, but they are a $100 billion company and have $7 billion in organic growth. 

Turning to other topics, Neidorff reiterated that the Affordable Care Act has been a success and people on the program love it. He said anyone that says otherwise is doing so for political gain. When asked about the flu season, Neidorff said it is stronger than normal this year and the coronavirus is only adding to the anxiety. But, he said, people are far more likely to get the flu and they can protect themselves by getting an annual flu shot.

Off the Charts: S&P Outlook

In the "Off The Charts" segment, Cramer checked back in with colleague Carolyn Boroden for a technical read on where the markets might be heading next. 

Boroden first analyzed a weekly chart of the S&P 500 Index, looking for symmetry in the past. She noted the market rally that began in February 2018 lasted 32 weeks. The rally that ended a little over a week ago had run for 33 weeks. She also looked at the size of the rallies. From December 2018 through May of 2019, the market rose 607. From June of 2019 through last month, the move was 609. 

Turning to a daily chart of the S&P 500, Boroden noted last week's bearish crossover between the 5-day exponential moving average and the 13-day exponential moving average. The same pattern has almost occurred in the Nasdaq as well. 

All of these patterns do not signal an imminent decline, but they do make the markets vulnerable to more weakness.

Lightning Round

Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Tuesday evening: 

Aimmune Therapeutics  (AIMT) - Get Free Report: "I think you're late to the party. People have known about their pipeline for a long time." 

1-800-Flowers  (FLWS) - Get Free Report: "I think it's fine." 

CEL-SCI  (CVM) - Get Free Report: "This is one I'm in favor of, even up here." 

CVS Health  (CVS) - Get Free Report: "Aetna was an expensive acquisition and it's an issue for CVS." 

Teladoc  (TDOC) - Get Free Report: "I think anything that cuts healthcare prices is a good thing. I like that." 

Virgin Galactic  (SPCE) - Get Free Report: "No, wait for it to come down, then you can get back in." 

AbbVie  (ABBV) - Get Free Report: "I think it's gonna be a good quarter." 

Lockheed Martin  (LMT) - Get Free Report: "I think that one is going to be excellent."

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At the time of publication, Cramer's Action Alerts PLUS had a position in CLX, CVS, ABBV.