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Rallies Start with Short-Covering

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Let's make it real tough. The main reason the market rallied today was put-selling. All day I saw giant sellers of puts, including puts on the banking index, puts on the Morgan Stanley High Tech index, and last, and most important, OEX deep-in-the-money puts.

Remember, when someone sells puts, that is bullish. As these indices were all much lower when the sellers sold them, you have to say that smart money took profits, betting that a bottom may have been reached in tech, the financials and the overall market. (How is it bullish? The person who buys these puts has to go and buy common stock to get hedged.)

What's it all mean? Rallies start with short-covering. They start with put-selling. Bottom line: Even under a

1990 scenario we should rally here. Couple hundred points. Then we have to see.

See you at the

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James J. Cramer is manager of a hedge fund and co-chairman of

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 a letter to at