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When the stocks with great news can't manage a rally, investors need to respect the bear. That was Jim Cramer's advice to his Mad Money viewers Wednesday after the markets posted more sizable losses. Cramer said there are some signs that capitulation is close at hand, but not enough yet to sound the all-clear.
Cramer called out General Motors (GM) as one case of good news that didn't matter. He said this company delivered the trifecta today: raised guidance, boosted its dividend and increased its buyback. Did it matter? Nope. Shares of GM closed the day up just 19 cents.
Then there are the FANG stocks, Cramer's high-growth cohort that includes Facebook (FB) , Amazon.com (AMZN) , Netflix (NFLX) and Alphabet (GOOGL) . All of these names suffered big losses, Cramer noted. His charitable trust, Action Alerts PLUS, owns Facebook and Alphabet.
Cramer said investors can never afford to wait for that "perfect" bottom, but so far he's not willing to advise buying just yet, even though the markets are more oversold than they've been in years.
Blame the Chinese
Like it or not, the Chinese stock market has taken control of our stock market, Cramer told viewers. That's why he offered a brief history lesson on how the Shanghai stock exchange has become a household word.
Cramer explained that from 2009 through 2013, while our stock market was recovering, the Chinese stock market was cooling, falling from 3,100 to 2,100 on the Shanghai composite. This move, Cramer said, was totally rational because the Chinese economy was also cooling.
But then in 2014, the Chinese decided to jump-start the Shanghai by linking it to the Hong Kong markets and encouraging foreign investment. This led to an explosion of margin investing, Cramer said, and speculating on stocks with borrowed money is never a good thing.
From 2014 through May 2015, the Shanghai soared to 5,100. But then the bubble burst. Despite all the efforts to slow the exodus, the Shanghai closed today at 2,950.
Given that all of the Shanghai's gains were artificial from the start, Cramer said he wouldn't be surprised to see it lose all its gains and fall to 2,850, the August bottom, or even 2,478. The Shanghai could even fall all the way to where the foreign investment began, down at 2,134.
That's why Cramer said he still prefers our stock market over the Chinese. The Chinese still have a lot to learn about financial markets.