We're in the sweet spot where everything is going well, "so how can short interest be so high?" asked Jim Cramer Tuesday on his "RealMoney" radio show.

The answer is, that's how it always happens, said Cramer.

Several weeks ago when market sentiment was gloomy, shorts were put on heavily, he said. The market oscillator indicated a deeply oversold market condition. The Investors Intelligence survey of bulls and bears showed a very high number of bears, and Cramer's hate mail was overflowing in volume and vitriol, he said.

"That's how it goes. That's how it always goes." When everyone gets too negative, that's the time to buy, he said.

On Tuesday, bulls got even more good news, said Cramer. The Federal Reserve released minutes from its last meeting that showed for the first time in two years, some of the Fed governors think rates have been raised too much, he said. That means the tightening is almost over -- a development the market has been anticipating for weeks, said Cramer.

"Now it's going to get hot and heavy," he said. Stocks are in "rampage mode," and Cramer wants people to get in.

Danger Zone

Cramer's "Danger Zone" stock Tuesday was Calpine ( CPN). Cramer believes the company's "management is not any good," and its debt load will force the company to file bankruptcy. "You can lose everything" in this stock, he said.

Market Sector Spotlight

Cramer discussed drug stocks in Tuesday's market sector spotlight.

Commenting on Sanofi-Aventis ( SNY - Get Report), Cramer said some investors have big expectations for the company's new drug, Acomplia. But, he believes there will be a lipid drug that will be bigger. Either way, he's sticking with his positive view on the stock.

Cramer said he also likes Syneron Medical ( ELOS).

Commenting on an upcoming IPO of Voyager Pharmaceutical, Cramer said one knock against it is that it isn't being done by a major firm such as Goldman Sachs ( GS - Get Report). On the other hand, Voyager has a drug for Alzheimer's, and because Alzheimer's is such a terrible disease, Cramer can understand why people might want to own the stock.

Cramer said he would buy Allscripts Healthcare Solutions ( MDRX - Get Report). He does not believe any of the rumors that have knocked down the stock recently such as the possibility General Electric ( GE - Get Report) will walk away from deals with the company.

In response to a question about Meridian Bioscience ( VIVO - Get Report), Cramer said Meridian is terrific and is positioned right where you want to be invested to play the biotech sector: making "the pans and picks for the biotech gold rush."

Cramer would buy Johnson & Johnson ( JNJ - Get Report) for a long-term hold, he said, provided one continues to do the homework necessary to determine whether the stock is worth keeping as time goes on.

Commenting on the drug industry in general, Cramer said drug stocks move on blockbuster drugs, and he isn't seeing much in the pipeline for the traditional American drug companies. Biotech stocks, however, are "still very right," he said.

That said, Cramer does like Schering-Plough ( SGP) because of its CEO, Fred Hassan. Cramer said phase one of Schering-Plough's turnaround is complete, and phases two and three will be better for the company than phase one.

Cramer's Callers

In response to a question about GameStop ( GME - Get Report), Cramer said some investors are selling the name because stores are out of stock of the Xbox. This is a short-term problem, said Cramer. Long term, there will not be a shortage, he said. The GameStop story will continue to be strong into 2006 and 2007 as the video game cycle fully kicks in. GameStop's stock is volatile, he said, but when it goes down, "that's when you have to pounce."

Commenting on Under Armour ( UARM), Cramer believes it will bounce at some point. He would consider buying a partial position for a trade with the stock down Tuesday.

About SanDisk ( SNDK), Cramer said whenever there is a big drop in a stock, such as Monday with this name, don't sell into the initial drop. "Wait for a bounce, and then you do sell," he said.Cramer said investors sold SanDisk on Monday as people began to realize the shortage in flash memory may soon be alleviated. When that happens, you can't be in the stock, he said. Cramer would look to sell SanDisk on a bounce to $50. SanDisk traded at $49.75 late Tuesday.

Commenting on how to recognize when a short squeeze is ending, Cramer said investors should look for an event that increases the supply of stock available to trade. Usually such an event takes the form of large insider-selling or a secondary offering. "Supply kills a short squeeze, not the earnings," he said.

Here's your chance to pick the stock you'd like me to feature on my radio show Dec. 1:
GM
Nokia
Dell
Pfizer
Sirius
Dow Jones

REMEMBER to listen in on Thursday for my take on the stock that wins this poll!

At the time of publication, Cramer was long GameStop and Schering-Plough.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict."