Sucker's Rally? Can't Tell

Buy only what's liquid and holding its own as a business.
Author:
Publish date:

It's always hard to knock down the stock market when the bonds are rallying -- even if the bonds shouldn't be rallying.

We didn't get any information that should lead to a bond rally today. If anything, the information was defamatory for bonds. But bonds rallied anyway.

So we get a knee-jerk stock rally. We are buying on account of temporary bond insanity. The combination of oversold and good bonds is just too juicy to resist.

For us, we scalp. We don't know what the employment number will be and we don't know how long the oversold condition will "protect" us from the downside. Last year we got much more oversold than we are this time around, but at that point we had

Dr. Strangelove or How I Learned to Love Leverage

. We don't have that now.

But we don¿t buy anything we would be unhappy about if it kept going down.

Let me give you two examples.

GM

(GM) - Get Report

is oversold and could rally on a good number, but I don't like the fundamentals, so I am not taking any.

Anheuser-Busch

(BUD) - Get Report

is less oversold, but I like it and would welcome lower prices to buy more, so I am putting some on. I am avoiding small-cap like the plague, even though they are the most oversold because if I am wrong about the number tomorrow and the bonds get washed down the drain, I will get crushed. Can't afford that.

Is this a sucker's rally? Beats me. Most of them start this way, with bad advance/decline, better NDX leadership and lots of negativity and short-covering.

Because I just don't know if it is a sucker's rally I am making sure that what I buy is 1) liquid and 2) doing well in business.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Anheuser-Busch. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may 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 at

jjcletters@thestreet.com.