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Cramer: Don’t Buy Till Dow 9,000
Published: Friday, 7 May 2010
The Dow’s intraday collapse of nearly 1,000 points on Thursday offered a clue into what investors truly think of this market, Cramer said during Mad Money. In short, they assumed the move was legit, and not some computer error.
These people believed that Procter & Gamble [PG 60.31 -0.44 (-0.72%) ] deserved to plummet to $47 from the low $60s, that the Dow’s decline was the natural result of Europe’s debt troubles and the riots in Greece. They showed they had no confidence in the markets, no conviction at all.
“And that’s deadly for stocks,” Cramer said.
But he was quick to point out the differences between the Europe Union and the US. While Cramer wouldn’t disregard the Continent’s affect on the American markets, he did note we’re much stronger than the EU right now. Employment’s getting better, housing is improving, and business is ticking up. So as scary as yesterday’s intraday plunge may have been, it was not the stuff of late 2008/early 2009, when the market had a fundamental reason for being that low.
That means, as bad as Europe is right now, there’s a level at which that contagion is baked in and stocks look interesting, and Cramer thinks we saw that level yesterday: Dow 9,000. And he said he doubted it was out of the realm of possibility that we could pull back to that level. Therefore, investors should wait for the decline before they buy anything again, other than his preferred accidental high-yielders.
In the end, though, people need to keep in mind that the American markets and economy continue to improve. The US is not the EU.
“Our markets will stop their declines sooner,” Cramer said, “and rebound harder than any of the markets over there.”
Take a look at this chart:
Number 1: I think the 9000 number was a Freudian slip. I think he meant to say 9900.
Number 2 Remember the relentless rally? That started in early Feb. 9900 would wipe that relentless rally out in less than a week.
Number 3 The damn fool is looking to buy
Number 4 The whole uptrend from July of 2009 will be wiped out and in a hurry and all the buyers of that good news will be trapped.
Number 5 The public will be told to buy the pullback. It is already starting.
Number 6 The economy will double dip and the market will take out its March 2009 lows.
What happened this week was was they call the initial impulse sell off. The bigger the sell off the bigger the credibility. It was a kick off for the down trend and it was a big one. I am thinking this sell off lasts for a long time. The economic news has been good the earnings have been good so say the experts. Like Cramer says look to buy 9000 because "in the end, though, people need to keep in mind that the American markets and economy continue to improve. The US is not the EU."
The problem with that is that the problem is going to be worldwide. Just take a look at the beating the markets in Brazil and China took. Take a look at the meltdown in the commodities. I have said it before and I will continue to say it this is a deflation not an inflation that we are staring at.
The ability of the banks to extend credit has been severely hindered. Cash is king and the credit card business is going to wither up. We have been conditioned to expect inflation and that is the way it normally works. Not this time.
Mikey
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