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NEW YORK (TheStreet) -- Has everything that was bad last month suddenly gotten better? That's what Jim Cramer wondered on Mad Money Tuesday as the second quarter kicked off with the bang.
No, sadly, things have not gotten better, Cramer continued, but the market has a short memory.
Cramer said if you want to understand the market's behavior, you must first understand the behavior of professional money managers. Back in January, these managers rotated out of the hot sectors of 2013 -- leaving the lucrative techs and biotech stocks -- and rotated into the then-beaten-down groups, such as the soft goods makers and the industrials.
But now that money managers don't need to show their hands for another 90 days, Cramer said the same biotechs and cloud plays that were abandoned last week have once again come into fashion, especially given how cheap they've become.
That's why a stock like Facebook (FB), which Cramer owns for his charitable trust, Action Alerts PLUS, was able to rally nearly 4% Tuesday as that stock now trades as a scant 24 times earnings. That's also why Celgene (CELG), another Action Alerts PLUS name, and Gilead Sciences (GILD) both popped as well.
Helping all these beaten-down stocks along will be the analysts, who have been curiously silent the past few weeks. Cramer told viewers to watch for them to emerge from their bunkers starting Wednesday when they will likely begin recommending investors follow the pros into these beaten-down stocks.
The pros have to play by rules, Cramer concluded, but once you know those rules it's easier to predict what's coming next.
Beware the Bubble
Is there a bubble forming? Cramer said that's a question he's been asked a lot recently. His answer? Yes, and no.
Cramer said that, overall, there's no bubble. The S&P 500 trades at an average 17 times earnings at the moment, and that's cheap by historical standards.