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The Purest Theory of Trading Shattered

The trader says cyclicals and consumers shouldn't be declining at the same rate.

This stock market drives market purists nuts. It simply makes no sense that the retailers and the drugs are going down at the same time. The cyclicals shouldn't be declining at the same rate as the consumer stocks. The

Morgan Stanley Consumer Index

or the CMR is declining one-for-one with the

Morgan Stanley Cyclical Index

or CYC!

You are supposed to sell the retailers when you raise rates because the rate increase slows the economy. You buy the drugs after the rate rise because the drugs do better in a slower economy. They aren't supposed to exist in the same negative space!! Whatever happened to that bad-for-the-goose-good-for-the-gander logic that prevailed for the previous 20 years?

So what is the pattern?

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You sell listed stocks after a rate rise and buy


. Or you sell the traditional economy and you buy the commercial economy stocks. You sell stuff you know well to buy stuff you don¿t know well.

I guess it's that revoltingly simple.

I vow to get it right next hike.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Morgan Stanley Dean Witter. 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