Watch the banks!!!!!!!!
These stocks have been pummeled mercilessly during this period. Not an ounce of lift, not one. If they can rally today with the
going up, there could be a good trade as these companies will start reporting. I bet they will begin to talk positively about their own risk controls and positioning.
Morgan Stanley Dean Witter
said when they reported? They made tough job cuts, they bit the bullet on unprofitable divisions and they made hay in bonds. Some of them were even short the real. This group is now oversold and ready to rally, in my opinion.
Why does it matter? Because you NEVER get a healthy move without these guys. I always play with one foot out the door when the banks aren't acting well. They are the pulse of the market; a true measure. When they act badly, the move is a trading move. When they act well, they set up a rosy backdrop.
Why is that? Probably because they are microcosms for the market at large. They tend to be long, whether they like it or not, and then tend to do well in times of economic stability, which is what the broader market wants. But most important, it is self-fulfilling. Guys like me are trained to watch these stocks. In fact, I first was taught this by the late, great Ed Hart, who used to play the role of graybeard at
when that was the only game in town on TV. He used to talk endlessly about the important of watching
-- heck, they don't even exist anymore -- as a measure of the market. It got so when I used to call in to my brokers I used to ask for those quotes before my own so I knew which direction to take. It is that important.
Right now, they look good, but I am watching
like a hawk -- my Ahmanson, I guess -- because there are massive sellers. Sometimes we just have to wait and see.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication his fund was long Citigroup, although 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 a letter to TheStreet.com.