So, five days ago we are talking about breaking back to above Dow 10,000 with ease. Now is there anyone out there who doesn't think that we will soon be retesting the mid-7000s? SPX 750, here we come?
What the heck happened in a week? Where did all of that optimism go? We haven't had that many preannouncements yet. We haven't had all of the retail failures we expected, and we didn't even get a spike up in the bad commodities -- like gasoline -- that had any last to it.
Of course, the most likely scenario about what happened is that we figured with all of the crises solved, the major banks no longer an issue, we would then be propelled higher. We also didn't have the reckless short-selling that had so characterized this market.
But I think we forgot the earnings. And we bounced so high that we seem to be anticipating an earnings turn imminently. Most important, I think we were fooled by a cessation in selling by hedge funds. We are now getting real selling from non-hedge funds, people who want out for greener pastures, coupled with a diminution in earnings that makes staying "up here" impossible.
This is the Nucor (NYSE: NUE) (Cramer's Take) problem writ large. Nucor, the best steel maker, dropped to $25 in November. It's questionable that it should ever have been there. But then when it reported really bad numbers, it doubled. That's equally questionable.
It should never have been down so much. Then it should never have been up so much.
Nucor has been played out all over in many sectors, like retail (JC Penney (NYSE: JCP) (Cramer's Take), Kohl's (NYSE: KSS) (Cramer's Take)) or oils (Chevron (NYSE: CVX) (Cramer's Take), the best example) or insurance (Prudential (NYSE: PRU) (Cramer's Take), MetLife (NYSE: MET) (Cramer's Take)).
Now the expectation is that we will see the lows or near the lows on all of those that shouldn't have been as high as they just got.
I don't think that will be the case. I think we will not go back to those levels with the exception of a few financials that are at critical moments, most notably Citigroup (NYSE: C) (Cramer's Take), and even more importantly, Bank of America (NYSE: BAC) (Cramer's Take).
I think we'll meander lower. I do not think we plummet.
We got oversold, we got overbought. And now we go back to equilibrium and hang out for a while.
Not great.
But not the depths of despair either.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
1-13-2009 @ 4:13PM
beachpaul said...
How many times has the DOW rushed to 9,000-9200 in the past 90 days only to slide back to 8400- 8200? Four? Five? As long as the 8200 bottom holds it will meander, up and down, about and around, going nowhere. What happened to "the market has already priced in this, that and the other", for the next six months? Oh, yeah, earnings? I forgot! Does the DOW still do that, Cramer? You know? EARN.