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NEW YORK (TheStreet) -- There's no denying the market's buoyancy on a day like today, Jim Cramer said on "Mad Money" Tuesday. There is a message hidden behind the rally, and you have to look at the stocks making moves to decipher it.
Cramer said there are good rallies and bad rallies. A good rally has many sectors rising with strong leadership. A house of pain rally is led by a few stocks representing only a few sectors.
Today represented the right kind of rally. Cramer saw a rotation back to classic growth stocks that had been left behind this far this year, including Celgene (CELG - Get Report), Johnson & Johnson (JNJ - Get Report) and Starbucks (SBUX - Get Report). These are stocks that don't need a red-hot economy to rally, which tells Cramer that while interest rates may be trending higher, they're not going sharply higher.
Thus far, transportation, industrials and banks had led this year's rally, groups that stand for one thing: higher interest rates. Interest rate growth is the sign of a healthy economy, Cramer said, but he's not for lightning-fast increases, which are bad for businesses.
Some analysts on Wall Street are worried that strong jobs numbers released on Friday could push interest rates too high, too fast. Today's rally says temper your worries, according to Cramer.
Consider Johnson & Johnson, a holding in Cramer's charitable portfolio, Action Alerts PLUS. Cramer's been perturbed for some time about the relative underperformance of this fantastic stock, and concerned that if solid companies like Johnson & Johnson falter in 2014, the economy might be getting too hot. When that happened, people prefer to invest in inconsistent, cyclical stocks rather than steady performers.
Same with Pepsico (PEP - Get Report). Here's a company that, unlike Coca Cola (KO - Get Report), has delivered solid numbers quarter after quarter but had seen its stock seemingly left for dead, Cramer said. That's a terrible sign of interest rates about to rise. This also holds for Starbucks, Whole Foods (WFM) and Chipotle (CMG - Get Report), among others.
These classic growth companies are natural born leaders, Cramer said, throwing off cash, rewarding shareholders and symbolic of a healthy market when their stocks are on the rise. The rally in these stocks is glaringly bullish.
Cramer said he's encouraged by the many biotechs that moved into the green today, as well as LinkedIn's (LNKD) surge in the face of a downgrade, a positive sign for both the company and the sector as a whole.
Off the Charts
Cramer thinks 2014 is going to be a banner year for Bank of America (BAC - Get Report), which will benefit from rising interest rates and has enormous room to run with most of its litigation behind it. A lot of big banks have already rebounded hard, and the same is imminent for Bank of America, another AAP holding.
Cramer introduced a chart by RealMoney's Tim Collins to dig deeper. Collins' chart is so positive, it's like bear repellent for short-sellers, Cramer said. Who wants to pick a fight with a raging bull?
Bank of America is already up 6% this year, on the heels of a 36.48% return in 2013. Don't get too greedy about waiting for a pullback. You might get some small decline, but Collins doesn't expect much of a drop. The stock is coming out of a nice period of consolidation after a nice push in November. If the current run is the same size as November's $2 per share rise, Collins thinks the stock is headed to at least $17.75 per share near-term, up from $16.50 at today's close.
Ideally, Collins would like to see a pullback to $16.10 or $16.25, but there are plenty of signals that Bank of America could be a buy at current levels, Cramer said.
While Bank of America's accumulation-distribution line has been trending lower, Cramer said, the technical analyst isn't concerned. Each time in recent months that the company's stock has hit a floor of support, it has rebounded and been a buy, a rebound we're seeing in the first few trading days of 2014 and that could continue unabated for a few weeks.
Since the beginning of 2013, Bank of America has had a strong and steady upward channel, about as textbook a bullish trend as they come, Cramer said. Every accumulation-distribution line drop has been met with a rebound, providing a read on what the big institutional investors are doing.
Stick to Your Guns
Ready to cut and run? If you've put a lot of time and research into a stock buy, it's important to stick to your guns and don't back down, Cramer said. Last year, Cramer heard many calls to pull out of the market, but the S&P 500 finished up 29.6% all told. Selling into weakness would've cost you some amazing gains.
But even a seasoned pro like Cramer can make this mistake. One of his charitable trust's biggest blunders was losing its trust in Bed Bath & Beyond (BBBY - Get Report). Cramer bought the stock in the fall of 2012. He loves going to the store and, more important, he loves the company's regional and national expansion.
Historically, the stock tended to be too expensive for his tastes. When it pulled back to $59 per share from $75 per share in the summer of 2012, it looked cheap enough to buy -- but the stock began rebounding too fast. Cramer, having done his homework, decided to wait for the next selloff to pounce.
The next quarter, Bed Bath & Beyond reported unimpressive numbers. The stock got pounded and Cramer's trust started a position. After the next pullback, the trust bought more.
Every subsequent dip, the trust bought more until it became one of AAP's largest positions. By November, Bed Bath & Beyond was weighing the portfolio's total performance down. Cramer began losing his resolve. He couldn't take the little decline every day. After BBBY finally climbed up to about halfway where the trust had bought it, he decided to take the hit and sell out.
Cramer was elated, a huge weight lifted from his shoulders. Then the company started soaring, and Cramer was too traumatized to buy back in. If he'd stuck with the stock, it would've been one of the biggest gains in the trust's history.
The lesson? If you've done the homework and have conviction about a stock, don't give up on it just because it's going lower and you can't take the pain, Cramer said.
Executive Decision: John McConnell
This is the year that the U.S. economy's going to pick up some speed, Cramer said, so you're going to want to pick up some cyclical smokestack stocks for your portfolio.
Take Worthington Industries (WOR - Get Report), a market leader in value-added steel processing for the auto industry. Worthington recently announced plans to acquire a 75% stake in Aritas, a leading European liquified natural gas company. In its second quarter of 2014, Worthington revenue rose 24% from the previous year to $769.9 million.
Worthington CEO John McConnell said steel has always been the backbone of the company and the company is always looking for other companies that work with steel so it can leverage its purchasing power. The company processed six million tons of steel in 2013, making it the largest purchaser of steel in the U.S. behind auto makers.
Cramer praised the company's break into the LNG space through acquisitions. McConnell said alternative energy is widely used, from transportation needs to mixing stations in the field. McConnell sees it as an abundant, clean fuel and it makes perfect sense to use it and develop an infrastructure for more transportation uses. The government should be supporting a quicker move to LNG, McConnell said.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer discussed Starbucks CEO Howard Schultz's note to partners yesterday that outlined two new trends Schultz sees coming: a significant downturn in traditional/pedestrian malls versus online shopping, and a growing demand for gift cards that give people the gift of choice.
The 2013 holiday season was the first where many traditional retailers saw in-store foot traffic give way to online shopping in a big way, Schultz said. Customers are changing the way they shop, watching and waiting and comparing prices before buying the products online, frequently using mobile devices. Starbucks, Schultz said, was "not immune" from the downturn. The company plans to offset those losses by initiating "world-class digital and mobile payment expertise."
When it comes to stores that sell commodity products, traditional retailers are going to get dinged, Cramer said. Unlike Starbucks, most retailers don't have a large number of gift cards at the register, and thus don't stand to benefit from the trend. Online growth and gift card popularity look like they're here to stay.
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-- Written by Chris Sahl in Boston.