Cramer's 'Mad Money' Recap: Recipe for a Rally (Final)

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NEW YORK ( TheStreet) -- Taking a page from his cookbook, Jim Cramer told the viewers of his "Mad Money" TV show Tuesday that the recipe for today's market rally included four primary ingredients: Ben Bernanke, consumer confidence, housing prices, and the retail investor.

Donning a chef's hat and apron, Cramer was baking a cake to celebrate the rally. He said there's a lot to celebrate in the markets, not the least of which is Ben Bernanke.

Cramer said while he was initially a critic of the slow moving Bernanke, Cramer credited him with keeping the ATMs at our local banks full of cash and taking radical actions to stabilize the markets and our country's financial system.

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The second point to celebrate was home prices. Cramer said he was chastised in 2007 after predicting home prices would fall significantly. He was further chastised in 2008 when he predicted a home price bottom on June 30, 2009. Yet today came news of the first month-over-month increases in home prices. Cramer said he's not worried about foreclosures or tax credits stifling the recovery in home prices because its simply cheaper to own a home than to rent one and that, he said, is all that matters.

Other reasons to celebrate, said Cramer, include the return of both consumer confidence and the retail investor. Cramer said the little guy is finally starting to put money to work in the markets again, and with consumer confidence on the mend, the rally in the markets can only continue.

Cramer said with all of these positives in the market centered around housing, he remains bullish on the banks, particularly ones that own a lot of homes, including Bank Of America ( BAC), Well Fargo ( WFC) and JP Morgan Chase ( JPM), three stocks which Cramer owns for his charitable trust, Action Alerts PLUS.

Fundamental Pattern

In the "Off the Charts" segment, Cramer showed viewers how to look for a pattern that's sure to make them money. He said that the "completed basing pattern," coined by famed statistician John Bollinger, is a sure fire way to spot a stock that's headed higher.

In a basing pattern, a stock tests, then retreats from a level multiple times, forming a "base" that it seemingly cannot penetrate. The base is "completed" once the stock finally breaks through this level, showing significant buying interest and strength in the name.

Cramer said the completed basing pattern is one of the most fundamental patterns in stocks, and one that every investor should be able to recognize.

Global Demand

With commodity prices rising for minerals, Cramer took a closer look at Vale ( VALE), a stock which he owns for his charitable trust, Action Alerts PLUS and a stock which was both upgraded, and downgraded, by Wall Street today.

Cramer said it's not often two Wall Street firms produce such drastically different research, but such was the case today when HSBC downgraded Vale, while rival Morgan Stanley upgraded it. At issue is the demand for Vale's shipments of iron ore, said Cramer. HSBC sees a drop off in demand from China, while Morgan Stanley sees a pickup in Europe and other parts of the world.

Cramer said he's siding with Morgan Stanley, noting that even the HSBC analyst raised his price target on the company in his report today. Cramer said while demand from China may be falling, you simply cannot count out the rest of the globe. He said increased demand and possibly price increases at Vale could more than offset the potentially slowing shipments to China.

Cramer said he sees Vale hitting the high $20s or even the low $30s on any sizable increase in global demand for iron.

Duel of Warehouse Kings

Cramer continued his search for the king of the discount retailers, this time by pitting the two warehouse kings Costco ( COST) and BJ's Wholesale ( BJ) against each other to see which one rose to the challenge.

Cramer said when comparing the warehouse stores, it's all about same-store sales. He said BJ's has the advantage, with sales up 2.9% in its most recent quarter, while Costco saw sales flat and down 1% in July.

When it comes to inventory, Costco has the advantage and is doing a better job controlling its costs, he said. However when it comes to merchandising, who has the most appealing products, BJ's again takes the lead, he said. While Costco focuses on 4,000 different items in its stores, rival BJ's carries over 7,200 items, giving its customers more choices, in more sizes, than Costco, he added.

Cramer said when it comes to expansion, BJ's also has more room to grow, and is stepping up its expansion plans to take advantage of better real estate prices.

Cramer said while he prefers shopping at Costco, BJ's is the better stock. The company trades at just 12 times earnings, while Costco, often perceived as the higher end play, commands 18 times its earnings. Cramer said this notion could change, however, as BJ's simply runs its business better than Costco.

Lightning Round

Cramer was bullish on Medivation ( MDVN), Bristol-Myers Squibb ( BMY), Union Pacific ( UNP), Nucor ( NUE), Kinder Morgan ( KMP), Honeywell ( HON), First Niagara Financial ( FNFG), Weyerhaeuser ( WY), Dana Holding ( DAN) and Ford Motor ( F).

He was bearish on Babcock & Brown ( FLY), Seaspan ( SSW), Alcoa ( AA), Atlas Pipeline Partners ( APL), Hexcel ( HXL) and Boise ( BZ).

-- Written by Scott Rutt in Washington

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At the time of publication, Cramer was long Bank of America, Wells Fargo, Vale, Bristol-Myers Squibb and JPMorgan Chase.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

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