What is the major trend? Where is the money really going? Is the action in the drug stocks (flat for a couple of days) a signal of a bottom? Is the NDX rally today's countertrend?
These questions flow through our shop all day, every minute and every hour. We are constantly trying to figure out what the major and minor trends are, always with an idea toward trying to figure out the Easy money and avoid the Hard money.
So let's focus on two different stocks to bring the exercise into focus,
. Both have had bad news of late. In EMC's case there is news of a
-inspired loss of business. The company has assured us that it is minor and will be made up, and the stock had already been down 25 points in advance of the bad news. Everybody reiterated buy and made nice to the stock.
Deere, on the other hand, right at its 52-week high last Friday, slapped us with some horrid news: a preannouncement of bad earnings. This was no loss of a piece of business, this was an acknowledgement that business stinks. Downgrades and number cuts surrounded the story.
How did these companies react to the news? EMC got crushed again, down another 10%. Holy smokes, that's a rough one. Despite all of that reiteration-of-buy-rating buying. Ouch.
Deere? Two days later it is back to the level where it preannounced. Without any Street support. That's amazing to me. It is why I bought
on the discount caused by the
downgrade, and why I am not speculating on EMC now as much as I would love to.
My point: The major trend lets you have your back. Does that mean you should sell your
? No, it just means that the big money keeps going in one direction and you have to know that direction to trade well.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication the fund was long Cisco, Halliburton and Hewlett-Packard, 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