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Jim Cramer's Timing Could Be Better on This One

By Jeff Clark
Thursday, August 7, 2008

Jim Cramer is right... Well, sort of.
 
Last Wednesday, Cramer – host of CNBC's "Mad Money" television show – announced, "The bear market is over." The Dow responded by dropping more than 300 points in the next three trading sessions.
 
But before we dismiss Cramer to go wash the egg off his face, let's explore the possibility that the bear is dead.
 
Forming a bottom is a complicated process for stocks. It typically involves a stock hitting a low, bouncing, and then coming back down to retest the low. This action creates a "W" pattern on the chart.
 
We saw this "W" pattern when the previous bear market ended back in 2002...
 
 
And the best time to buy stocks would have been on the retest of those lows.
 
We also saw a shorter-term version of this pattern back in March, right before the market exploded higher for two months...
 
 
Here again, the best time to buy was on a retest of the lows.
 
Perhaps the market is trying to form a bottom now by retesting the recent lows and thereby forming a "W" pattern. But is this a major bottom signaling the end of the bear market? Or, is this another short-term bottom kicking off a few weeks of rally before rolling over and making even lower lows?
 
I think it's the latter.
 
September and October are notoriously bearish months for the stock market. In fact, take another look at the first chart of the S&P 500 in 2002. Notice the initial bottom in July that preceded a strong rally through August. The bears took over in September and clobbered the index straight down until the final bottom in mid-October.
 
That's the road map I'm working off of. And it fits in perfectly with my long-held belief that a new bull market will kick off right after the Presidential election.
 
But Jim Cramer is right for the short term. Although his timing could be a bit better.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

Retail behemoth Wal-Mart hits a new high... up 28% this year.
 
Medical stocks still running... Johnson & Johnson, Varian, Valeant, Covance, Thortec, and Celgene at new highs.
 
Falling oil prices fail to help shippers... Aries Maritime, Danaos, Teekay and Top Tankers... both stocks find new lows.
 
Earnings today... Barr, Barclays, Crocs, ATP Oil & Gas, Martin Marietta, Penn West, Winthrop Realty, Toyota.

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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%