Cramer's Rewrite of His 'Tape Tells All' Column

The trader revisits a Tuesday piece.
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I short-circuited the selection process by fiat this week when I said I would rewrite this article after I first finished it. I had gotten a dozen requests to do a rewrite before the cyberink was dry anyway.

I also received a very smart inquiry from a reader asking why I couldn't make every piece understandable from the outset to everyone. The comparison the reader made was to William Safire of The New York Times, who, she said, wrote so that all could understand him even though he touches on complex, difficult topics. The criticism is fair (frankly, I was flattered to think I could be in the same paragraph as Safire, whom I often disagree with, but never miss). Here is my answer: Much of my stuff is written on the fly. I am trying to give you the word from the turret, Internet time, and I simply don't have the time to pull it off with the eloquence or the clarity that the topic would merit. So, I save the more elaborate versions for the weekend. I justify this inherent flaw with the following logic: Newbies might not be able to take advantage of some of these thoughts on a real-time basis anyway, but investment pros need not be worn down by elaborate explanations of things they know already. This piece is the perfect example of one where much of the stuff is second-nature to my turret deskmates around the Wall Streets of the world, but might as well be mindless gibberish to others.

When industry watchers try to figure out how


(GPS) - Get Report

is doing, they don't just want to know whether people are buying merchandise. There are always going to be buyers.

They want to know at what price Gap is selling the merchandise. Is it above what Gap paid for it? Is it well above? Or is it "promotional" and therefore lacking great margins? Is Gap selling product for just slightly above cost, making all of those top-line sales not fall to the bottom line?

(In other words, it is not enough to know that merchandise is moving out the door to try to figure out how a store is doing. You also need to know how the pricepoint. This logic reminds one of the old Filene's pricing structure in Boston, where items kept getting marked down each week until they moved. That's a perfect analogy to the kind of logic I am about to describe.)

It's the same thing in the stock market. Tape watchers, or those who make a living trying to spot at what point merchandise gets sold, are best able to judge the health of the market. Shrewd traders look for "prints," or sizable pieces that go on the tape that required merchandising of some sort.


Talk about a confusing, anachronistic, word. When there was a ticker tape, bigger trades would stand out as "prints" of large numbers on the tape. People now speak of prints even though there is no real ticker, other than that scrolling thing on the bottom of CNBC, or the one that might be available if you have a New York Stock Exchange tape on your computer. You can set your tape for the size of the trades. (For instance, on my ILX machine, I have scrolling line that shows or highlights all trades made that are larger than 5,000 shares. Periodically, I will see a very large trade go on, for instance, a trade of 300,000 CVS at 45 1/2. I will hit up the stock and see that it is down 3 points, and that the big "print" that I saw on my tape at 45 1/2 might have been some sort of "clean-up" where a big seller had finished. I immediately ask my trader to find out who "did" the print, or the trade. He will then ask a broker who will call down to the floor of the exchange, or he even might know the answer himself, because a broker might have told him that he was working a "piece" of CVS that might trade in a "print" that we might want to be "involved in." (All of this is slang talk for the following: I have a guy who has been selling and selling and selling the stock and knocking it down every time he does because there is no demand at the 48, 47 or 46 levels. Now we have found a level that appeals to buyers and a print is going to occur. We might want to get involved because there is "real" demand at that level, meaning that it is unlikely that the stock will go down from there and with the seller our of the way, it may even go up. (This event actually occurred, although not in that big a size, and I elected not to do so, foolishly, because it would have been a darn good trade. I didn't do it because I was involved in three others just like this and if they all went bad I would be one hurtin' cowboy.)

Some of these pieces are secondaries, like the


(KSS) - Get Report

trade last week, in which I participated. As long as Kohl's holds the "print" price of 73 1/2, where the deal occurred, the stock will be regarded as healthy. If it deteriorates below the print price, as it did at one point Monday, then it will be regarded as unhealthy or -- using retail terminology -- promotional. A close below the print could be perceived as very negative.

(Darn, was this ever prescient. I got crushed in Kohl's as the print was violated, or broken through, and sellers came in like ants to sugar. I managed to do some rope-a-doping and bob-and-weave when the stock got to 70, but this has been a brutal piece of business for me so far. For bigger traders who know this stuff well, as soon as this piece of business couldn't hold the offering price¿or print¿that was a huge red flag. Why haven't I sold? Because I think it will come back.)

Other times, these prints are just important pieces of merchandise that occur during the day. At important inflection points in the market, prints fail, a really bad sign, or prints hold and work, a great sign. For instance, last week, there were a series of prints in


(T) - Get Report

that failed to hold.

That is, there were trades that went on, large, six-figure trades, where sellers sold at discounts to previous sales. These should have held if the stock were strong and they didn't. As I mentioned last week, these were tells for me to go, and I did not listen to them.

(Of course, what happened with T was exactly what a lot of people said would happen. Once the bond deal was out of the way, the stock rallied. I know that it is very rare that conventional wisdom is as effective as it was in this case. I can't believe that T went down as far as it did in front of the bond offering or rallied as strongly as it did after. I mean, like, who was stupid enough to sell it on this? (The answer, of course, were people who could not take the pain because there was no fundamental reason for it to fall in the first place. But because the whole market could be overvalued it is very hard to make such a judgment. People panicked at 77 on T and a giant series of prints went on at that level that HELD and that was the signal you needed to get in. Could your electronic broker have spotted these prints? No. Could a real live broker have seen them? You betcha. Would he have known to look for them? Yes if a) you told him, or b) he reads

Now the stock is all the way at 78 and I violated my trading discipline by not kicking out T the moment I saw the prints "violated," meaning that the stock immediately went under the print price.

That is a sign that the stock is in bad hands. Had these prints held and the stock rallied, I would have known that T had some real power to it.

(Again, this cuts to the discipline/conviction theme that I so often return to. It took conviction that T was great to stay long it through this swoon. But a disciplined trader, my wife, for example, would have blown the stock out when the 83 prints didn't hold and bought it back when the 77 prints did hold. (My wife loved trading T. When I first met her she was shepherding a 5 million-share piece she had put together at the suggestion of Jack Grubman, the Smith Barney analyst, at that time at PaineWebber, when she was working at Steinhardt. She had a huge home run and scaled it out 100,000 shares at a time every quarter of a point over the course of about three months. Great, great trading. When she was trading, she would have her stable of stocks and just watch every take and every hit -- every buy and sell -- and know where all the merchandise was and who was shopping it. She would simply look up and say, "the T print is not holding, I am taking my profit. Be sure there is nothing wrong with the fundamentals. I will revisit this when I think it is right." (And then she would avoid it until she saw a print that held. This is very, very labor-intensive stuff and is less day-trading than following flow and supply and demand. It is disciplined, unglamorous blocking and tackling and requires so much concentration that my wife could not do it three days a week, as she tried to after our first child was born. She didn¿t want to do it any more anyway, having done it for 10 years.)

I saw the same thing in CVS

(CVS) - Get Report

, another poorly acting stock. I love CVS, but I don't want to buy any until I see some stability and some prints hold. There were many times that so-called "clean-up prints" occurred: big pieces of merchandise meant to complete a seller who had been doing damage to the stock. But each clean-up print was soon violated and the stock has since dropped a quick 5%.

(We didn¿t know the print was going to hold until Thursday when the overall rally cleaned up all of the sellers. My wife would have been marveling -- what a great piece of merchandise -- had she been with us. You would have thought she was at Saks or something. But it was just stock, that's what she loved.)

When stocks violate the low of a print, that is a sign that sellers are overwhelming buyers and you don't want to be there short term. Longer term, all of this could be gibberish. That said, I hate being underwater on a stock, just hate it, and I watch this stuff as closely as possible.

(This, again is a variant of knowing when to bolt to avoid being down big. Traders must always avoid the big losses, as big gains take care of themselves. It is trite; but you have to let the gains run and the losses be cut. When I don't do this well, as I didn¿t last year because I couldn¿t get out of my small-caps without annihilating them, performance evaporates.)

On Friday and Monday, many prints were violated throughout the market. They contributed to the negative tone of the market overall.

The only thing that cures this ailment is lower prices. Merchandise finally gets to a price where it holds and then moves and stocks rally. Are we at that level yet? We weren't Friday and we weren't Monday.

(Wednesday's session produced a lot of prints that subsequently held. Again, it was hard to tell they would, but if you took that gamble you did great.)

So, keep an eye on the prints. Look for big trades, mark them down where they occur, and then check back later in the day to see if the stocks are above or below these prints. If they are above, we have reached safe levels. If not, we have to go lower before we bottom.

(You need a human broker to help you with this. You shouldn¿t even be focused on prints if you are a casual investor. If this were sports we would be talking about how well an interior lineman pulls left, or whether the nose tackle can spin around the guard effectively. It is nitty-gritty stuff. But if you are in the game, you have to know these details and you need coaches, human coaches, to help. You also have to develop trust. Brokers won¿t open up to just anybody. They don't want to give you their flow and have you shoot against them by betting against CVS at 45. They also need to see commission dollars for this stuff, as this is the proprietary product that they offer.)

I will pounce on T only after I see some prints hold. I bought more Kohl's when I saw the print hold at the end of Monday's session. I still can't get the courage up to buy CVS. Not yet, but soon.

(I will rewrite this piece for newer traders this weekend. The T print held. It was a good week.)

James J. Cramer is manager of a hedge fund and co-founder of At the time of publication the fund was long AT&T and Kohl's, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending an email to