Get ready for a decline

After Tuesday's rally, expect a big raid no matter the news. That's probably the safest way to play it ahead of the Fed.

By Jim Cramer Jun 19, 2013 9:40AM

thestreet logoHow in heck can you tighten or taper when copper's just getting pounded and steel prices can't hold up? How can we think about tapering when Airgas (ARG), which has its fingers in every single pie says non-residential construction is very weak and Terex (TEX) agrees? How do you start tightening when Europe's still in flux and China seems to be going down fast?

 

How do we base the end of QE3 on homebuilding when we didn't get good homebuilding numbers Tuesday?


What's so strong out there besides the heftily-manipulated price of oil? Or do we just decide that enough is enough, job done? Or is there something else at work I heard today which is, "Hey, it isn't creating any jobs at all. So what's the point?"


I think that's nonsense. Whatever jobs that can be found are either tied to the wealth effect from housing and stocks or to the energy revolution. The latter Bernanke has no control over, but the former he could drastically trim if he's not careful.

 

Federal Reserve Building (© Hisham Ibrahim/Corbis)All that said, I think the issue's gotten out of control. If Bernanke does nothing, interest rates go higher. If he says he is going to start tapering, rates go higher. That's Because people believe that rates wouldn't have gone up already if things weren't better. People just seem to think it is time to normalize the curve. 

 

What is the scenario where rates do nothing? Permanent QE3? That's not going to happen. I can't think of one where the 10-year goes back under 2%. Can you?


So, was Tuesday's rally based on the idea that shorts fear what he will say, but when he says it they will just blast out of their longs and go short? I think Tuesday was all short-covering, literally, by people who feared one more article or one bit of input that said the Fed needs to do more, not less, to help stimulate the economy. I don't believe there was all that much real buying, because who gets long ahead of a meeting where the most obvious outcomes are not so hot?

We've had a lot of rallies like this before Fed meetings and it usually means you will get a big raid on whatever news there is. When it does go down in advance, you can have a post-announcement rally.

 

That's why I say get in shape for a decline. That's probably the safest way to play it ahead of Wednesday's big meeting on the heels of a spectacular day. And if it goes up, just let it run into the bell, as that's the big bad event theory playing out once again.

 

cramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in the stocks mentioned.

 

 

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45Comments
Jun 19, 2013 10:17AM
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Here is what Ben needs to do. Stop giving the money to the damn banks. Instead give $100,000 each month to 850,000 lucky tax payers. Trust me, if you give  850,000 people $100,000 EACH month THAT will stimulate the economy. The banks are not. This whole QE3 is supposed to stimulate the economy, not just give free money to the banks so they can sit on it.
Jun 19, 2013 10:00AM
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IMO, there's 1 huge, glaring thing to take away from yesterday's rally, and really the entire rally over the last year or so - the dismal volume.  We saw just 99 million shares trade hands on the Dow yesterday - unbelievably low!  There was a time not long ago when 100 million shares would be traded during a 20 minute televised interview with Buffet.  I've mentioned this several times over the last several months, when we'd see 120 million shares traded on the Dow in a full session - still a historically low number.  But 99 million shares like we had yesterday, coupled with a move like we had yesterday?  There's trouble in River City.

There's no breadth and no volume, no fundamental support or structure for this run-up, which is why everything and everyone will be hanging on Bernanke's every syllable.  Beware the house made of cardboard, built on sand, next to a river, at the base of a snow-covered mountain.

Jun 19, 2013 12:14PM
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Bernanke leaves in Jan 2014. Who will Obama appoint??  Someone who will continue printing money only at a faster rate. Obama will want inflation and he will try to control inflation with higher taxes. It is an old finance game, paying off old bills with new money.
Jun 19, 2013 10:11AM
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I've been through this FED stuff before and it ended in disaster. Looking at how we manage risk and reward in a bureaucratic political environment is stuff for volumes. Looking at Syria is a good example.  We need to let the Syrians decide what and how at this point.  We let them they find a level of governance on their own.  They will then have a worked "self" orchestrated Government they call and commit to being their own.  We interfere for or to some political end we want there will unlikely be a result that solves anything.  The exact same advice for this economy and market.  The FED is suffering from mission creep.  They should have little influence at this time.  We need to trust Capitalism and let the markets sift out on their own.  As in Syria their "result" they will own, the FED should let this market find its' own way and then we will respect the process.  This constant screwing with things that shouldn't be messed with is sooo aggravating.  This sitting around anticipating the FEDS' every move is stupid silly.  No different than crawling for crack. The FED is not the STAR folks.  The market is!
Jun 19, 2013 10:56AM
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"Instead give $100,000 each month to 850,000 lucky tax payers. Trust me, if you give  850,000 people $100,000 EACH month THAT will stimulate the economy. The banks are not."

 

It absolutely would work, Billy. Easier to monitor and manage, too. Of those 100,000 people blessed with instant cash and told to use it in a year or lose it, at least 70% would blow it stupidly (helps the economy), another 25% would purchase failure with it and the remaining 5% would and could go after business platforms competitively and succeed. In less than a year we'd have a whole lot of inroads helping oligarchies implode so we get those jobs and opportunities flowing again.

Jun 19, 2013 11:30AM
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Recent tea leaves all point to some tapering. Fed has to say "last call" sometime, and today's announcement will most likely usher in the idea of 80 billion versus 85 billion per month injection into the economy very soon, if not this meeting. Naysayers will say "inflation" is low, but this is not really true... the "inflation" has been built into the price of equities that have risen too far, too fast during (at best) a middling to mediocre recovery. The money had to go somewhere, but even the Fed cannot let prices of equities go on like this forever. That would truly be a disaster waiting to happen....

Jun 19, 2013 1:02PM
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If it is sell on the news as I expect then this round and any other round of QE is over and done.  It once again was an arrogant central bank mentality that they were the center of the Universe and we and everything evolve around them.  None of this is necessary and is for the most part, in the long run, counter productive.  I know the old story about well if we hadn't there would have been disaster.  A little disaster is better than a big disaster wouldn't you think? Yea we have heard them all before, and they have only made the disaster worse.   The political profession in this country has folks convinced they actually know something and we can't proceed without giving that pound of flesh.  What don't these cats screw up?  Still people vote for the same bad actors over and over. If only the founding fathers had spelled out seperation of state and business the same as they did church we all would be better off.  Sitting around waiting for this ACT is complete stupidity.  As long as we support free trade the arbitrage will make the average American much less rich.  This is a given.  Once you buy a product made by 14 year olds living in dormatories you cheapen your own worth.  At this point trying to paint it a different color or influence or soft sell it is not kind or honest.  It is a waste of time.  Americans wages will decline, we will have deflation, we will see a compression in GDP.  These are all given now and to waste our time and lives attempting to convince us otherwise is childish. You know how you read in history books about  disasters that befall the earth.  We are participating in one right now. So lets' get it on.
Jun 19, 2013 12:38PM
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 I can't think of one where the 10-year goes back under 2%. Can you?

 

Unemployment goes back over 8% and Israel launches an air attack on Iran while the US experiences deflation due to lower energy prices and high unemployment.

Jun 19, 2013 12:21PM
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Bernanke will be leaving without addressing the too-big-to-fail issue? Not even in a very early instance? And, who´s going to replace him? Yellen? What for? Just to get more of the same? We have more questions to be answered than just what the market is going to do for a few minutes after today´s announcement. 
Jun 19, 2013 12:28PM
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Jim,

It's called the world of fiat Keynesian economics based on cheap credit, fake money printed out of thin air, massive debt and useless consumption. Once you truly understand that, everything else is crystal clear. It's not quantum physics. Just plain ole common sense, Jim. But do you know what the paradox of common sense is? It's not that common.

Jun 19, 2013 12:41PM
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(Likely) Text of Bernanke's Speech:  "While the economy continues to make improvement, the Federal Reserve will continue to use all the tools at its disposal to keep what appears to us to be a fragile economic environment. It will, however, closely monitor both the rate of inflation, job growth and the financial markets for signs requiring a reconsideration of at least some of its overall policy and strategy at a future date. Thank you very much for coming. Help yourself to some heavy appetizers, and a cold beverage if you like.

 

Lay money on it....

Jun 19, 2013 12:31PM
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I actually think that Cramer is trying to put a rally together... using reverse psychology.
Jun 19, 2013 12:19PM
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Relax ................  The Stock Market is all Obama has to crow about ....... Baaaarack... Baaarack !

 

He won't let Bernnie stop the flow.

Jun 19, 2013 9:44AM
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stock up out of the shoot by 138 points.....

 

"After Tuesday's rally, expect a big raid no matter the news."

 

i guess you failed the ESP tests?

Jun 19, 2013 11:36AM
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"That's why I say get in shape for a decline."

 

Agree.

Jun 19, 2013 12:06PM
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On a waiting pattern down here, plenty of manipulators salivating, waiting on the Fed, their biggest and greatest excuse....Remember folks, its not what the Fed says, its how they "interpret" what the Fed says, and usually this is not a good thing, just another excuse for these scumbags to do their thing....We will find out soon enough...Remain very cautious.
Jun 19, 2013 12:05PM
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Wall Street, Big Banks, and most Big Corporations are like spoiled Brats. They are use to getting whatever they ask for and know the so-called Adults in the Room Don't have enough stones to stop their foolish behavior. Keep in mind however that Corporations control Government, not the other way around.

Most folks will ask the FED to get out of the way but many of the same folks would be asking them back if things really go haywire. You can't trust Today's Capitalism and you can't trust the Government. Society is boxed in and doesn't have what it takes ensure the Money Changers don't take us down with them.

Jun 19, 2013 7:06PM
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Cramer nailed it...  The market sold off as he predicted. If you've been bashing him you better come correct with a BOOYAH!
Jun 19, 2013 4:46PM
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Truth is often stranger than fiction, we call it as we see it folks, do not make anything up....Warned you to be very cautious, crooks will always be crooks....The Fed didn't say anything that surprised anyone down here, but its not what he says, is what you want to hear or interpret so these scumbags had a ball and did their thing and dropped this market over 200 points. For no reason whatsoever other than to rob folks of their hard earned money....Oh well, we warned you, saw it happening a mile away....Sad.
Jun 19, 2013 10:44AM
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"Get ready for a decline"...

 

We commonsense people are way ahead on that and have our Plan B's engaged or on tap for use. What do you Kool Aid folks have going for ourselves? Degrees-- almost everyone has one and having one means ZERO in a world where self-sustaining is the mandate. Wealth-- it's a perception without basis in Reality. If I'm hungry and I grew my own dinner, no amount of your Monopoly money will buy it no matter how weak you think I am. I eat, you are fed. There is a HUGE difference you will find out the hard way. Administration- is an invention of overly-organized business, not a necessity. Got Skill Set? YOU call it a "decline", Jim. I call it a return to normalcy.  

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