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NEW YORK ( TheStreet) -- The markets are just taking a nap, Jim Cramer told his "Mad Money" viewers Tuesday, and when they awaken from their slumber, they'll be heading higher. Cramer said the markets have seen several of these rest periods, which typically come after big rallies like the one we saw after the first of the year. After each of them the markets have continued higher, he added. That's why the markets were able to digest a host of bad news, including downgrades of American Express ( AXP), Biogen Idec ( BIIB), Regeneron ( REGN) and United Continental ( UAL), said Cramer, along with estimates cuts for Apple ( AAPL) and disappointing results from Lululemon Athletica ( LULU). Despite all of this bad news, a late-day rally still ensued. Even the threat of another Congressional battle over the debt ceiling, complete with the threat of a default, government shutdown, debt downgrade or all of the above, was not enough to keep the markets down, said Cramer, because in the end, business is simply good enough to sustain the rally. Cramer said he can't blame the analysts for jumping off the bull and getting cautious with countless estimate cuts and downgrades. After all, that's exactly what they did during all of the previous market naps as well. But as history has proven, those were the times to buy, not sell, because once the markets woke up they continued higher.
Picking Up the PiecesBreaking up may be easy to do, but what should investors do with the pieces? Cramer pondered that question with Abbott Laboratories ( ABT), a company that spun off its pharmaceutical division on Jan. 1 as Abbvie ( ABBV), a stock with a 4.7% yield, while the remaining Abbott Labs currently yields 1.7%. Cramer first recommended Abbott, a company he owns in his charitable trust,
Cramer said while the old Abbott traded at 12 times earnings with a 9% growth rate, the new Abbott is trading as 17 times earnings with growth expected in the low teens. This multiple expansion, along with solid management and conservative guidance makes Abbott Labs a buy, said Cramer. So what about Abbvie? Cramer said he was not as impressed. Abbvie does have good management and a decent portfolio of drugs, he noted, but the company's main product, Humira, goes off-patent in 2017 -- something that investors will begin to take into consideration soon. He said this will be huge for the company as investors don't yet know if Abbvie has enough in its pipeline to make up for the coming Humira losses. At its present valuation, Cramer noted Abbvie trades for 11 times earnings, about on par with Pfizer ( PFE), which has a solid track record and a known pipeline of new drugs. Cramer advised selling shares of Abbvie.
Off the ChartsIn the "Off The Charts" segment, Cramer went head to head with colleague Carly Garner over the future price of natural gas. Cramer said that, typically, natural gas sees a decline in late-January right before rallying between February through April. But with such a glut of natural gas in our country, is the seasonal cycle now broken? The number of natural gas rigs fell by 46% in 2012, but is that enough to stabilize prices? According to Garner's research, the answer is most likely "no," as the price of natural gas has been trading in a wedge pattern since its lows in April 2009. Natural gas currently has a ceiling of $3.70 and a floor of $3.20 with both the RSI, relative strength indicator, and the WPR, or Williams percent range, pointing towards more selling to come. Garner expects that if natural gas falls below $3.20, the commodity could see $2.60 or even $2.15 if emotions begin to trump the fundamentals. Cramer said he agreed with the technicals that, at least in the short term, the price of natural gas could be in trouble. He said that given demand and supply levels, the February rally will likely remain intact, but investors shouldn't consider buying in quite yet ahead of that expected rally.
He added that while low prices are bad for natural gas producers, investors must always keep in mind that low prices are great for utilities and those that use gas, like the chemical companies.