3 factors will now test market's strength

Some really negative developments go against a backdrop of an oversold market that has been avoiding positive earnings news.

By Jim Cramer Aug 6, 2014 12:41PM

Examining financial data through a magnifying glass © Henrik Jonsson/Getty ImagesCan the market sustain the loss of three different props in a period of 36 hours? The high watermark of inversion, a government-mandated stoppage of consolidation in an industry, and the end of hostile takeovers? Can it avoid getting crushed?

Think about it. This market has been punctuated by a couple of trends that truly had the bears on the run: takeovers and financial engineering of all kinds.

TheStreet.com logoBut in the past 36 hours, we have seen Walgreen (WAG) just say no to a foreign tax regime that would have really helped its shareholders even as it is a real acquirer of a foreign company. We have seen Twenty-First Century Fox (FOXA) walk away from a deal that might have been won if it had raised its bid at least once. We have seen Sprint (S) abandon its bid for T-Mobile (TMUS) ostensibly because the Justice Department's antitrust division, after blessing so many consolidating deals, seems to have, once again, blocked one in telco.

These are all occurring within the backdrop of Sandy Cutler, the CEO of Eaton (ETN), saying that inversion madness has gotten out of hand -- which is saying something, because his Cleveland company has a Dublin address. And David Pyatt from Allergan (AGN) starting to put some real points on the board with Valeant (VRX), his hostile pursuer, by tearing down Valeant and questioning its ethics and the legality of its moves.

Now, if we didn't have Russia in there not abiding by any international law, just a state gone rogue, I think we would be hit pretty badly anyway. Last I looked, though, there's nothing good happening there. So today is an interesting test day for market strength.

In the old days, the losses in the arbitrage community from not one but two busted deals would be enough to cascade down. In this case, both these deals were filled not only with arb money but with hot money.

And while Time-Warner (TWX) wasn't willing to negotiate, it wasn't playing the anti-trust card. It simply wanted to tell Murdoch that Jeff Bewkes could do a better job getting this stock to $100 and beyond -- where Murdoch couldn't pay without basically giving his company up to Time Warner. The total reversal without further effort was pretty stunning, and we know caught many off guard.

Sprint, on the other hand, had been going down for weeks as the speculation grew that T-Mobile just wasn't going to be had. T-Mobile is in the cross-hairs of others, so it isn't like that one's going to plummet. It just seems more pertinent to the bull that a Justice Department that has blessed massive consolidation in the rental car and airline businesses would stick by its mantra of caring about the public when it comes to telephone bills.

The shocking -- and I think it is shocking -- news that Walgreen isn't going to bow to the wishes of its shareholders, including some big activist funds, may already be in the market. The stock took a hit Tuesday as word got out that it would not use the Alliance Boots deal to invest. But if a couple of those activists, namely Jana, do hit the eject button, then this one's not done going down.

Did the president's comments that he doesn't care if it is legal, it's wrong, play a role? What I think matters is that the one company with real creed to invert because it has made a real, bricks-and-mortar acquisition, not a mail-drop one, is saying no to the tax benefits, meaning something has changed and the rest who pursue this technique must pause.

All in all, some really negative developments, all going against a backdrop of an oversold market that has been avoiding positive earnings news like Disney's (DIS) numbers or great restructurings like Gannett's (GCI), for a full week now.

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Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners. The portfolio
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More from TheStreet

Aug 6, 2014 2:50PM

(To 'I'm a Little Teapot')


Market shill Cramer tall and stout

Pick any stock and hear him tout

'You should buy this one, there's no doubt'

He will leave you long while he gets out

Aug 6, 2014 2:19PM
Go to the Bloomberg website and read about how the Obama administration allowed Delphi to do a tax inversion (Obama Aids Let Delphi Use Tax Tactic President Assails) as part of the GM bailout.  Delphi saves about $110 million/year in federal taxes as a result and is now a British company.  The president is against it, but his own administration did just that.
Aug 6, 2014 1:14PM
"Now, if we didn't have Russia in there not abiding by any international law, just a state gone rogue, I think we would be hit pretty badly anyway."

Like we did in Iraq right. Get a freaking clue Jimmy. Those with the Biggest and Best Weapon write the laws. Hardly makes it right or wrong. Most would have expected a snap back rally, Jimmy does also, he just wants to play his usual games.

Just as stocks can rise beyond belief, Stocks can go on sale for a long, long time. Never forget that as we move forward in this Massive Global Debt Crisis. We are just in the early stages. Many have expected far more volatility this year and that's exactly what has happened thus far. This House of Cards will be revealed eventually to everyone and it will begin to unravel, especially if interest rates soar and Gas prices do the same.

The interest rate Reset on massive Global Debt didn't solve the problem, it only delayed the inevitable. A bird in the hand is worth Two in the Bush.
Aug 6, 2014 2:04PM

Obama "doesn't care if it's legal"?  Of course not - he has no use for the rule of law.  Never has, never will.   

Aug 6, 2014 1:54PM
Bobo cannot seem to decide if he is a chicken little or market zealot so he offers alternate opinions on almost a daily basis ....

Aug 6, 2014 12:49PM
go ahead.  put stocks on sale!  i'm not cashing out for a while anyway
Aug 6, 2014 2:47PM
Reality vs. Stupidity:

- Who will buy Bank of America for it's increased dividend KNOWING that it took a $4 Billion hit just for existing legal fees, no settlements of late included, and isn't finished getting sued to death?
- Who will buy shares of any of the 11 banks that STILL don't have a viable strategy to not repeat the 07 and 08 catastrophic failure scenario?
- Who will buy Big Auto knowing that inventories for ALL makers now exceed 90 days and the model change month is September?
- Who will buy Big Retail or Phony Retail (Amazon) knowing that 76% of consumers believe we are heading into a catastrophic failure AGAIN, have hunkered down and fully stalled retail sales?
- Who expects ANY publicly-traded administrative and financial reliant business platform as we stop buying idiot assets from banks and stop giving away the 24th Century in the form of QE, to survive the day after free money ends?

GET OUT OF STOCKS, MORONS... stick the brokers and the banksters and let's get going on a REAL recovery with ordinary Americans in it. 
Aug 6, 2014 3:04PM

Cramer I think you are wrong in some of your ramblings....(VV that is some funny stuff).

Walgreens is UNFAIRLY getting beat up by a bunch of scumbags, taking some very good profits;

If they have been riding WAG as long as we have, this time..

I considered selling 300-500 shares a few weeks ago....NEVER SAW THIS COMING...!!!

But this is still a good stock and company, and a buying opportunity in my opinion.

I'll take the lumps this time, because Walgreens did us well early on, in the recent Recession...

Sprint is Sprint and has had it's troubles for sometime now....If you put "lipstick on her" you still have, well you know where I'm going with this..??? don't buy a dress..

And the Time Warner/ Fox has been an ongoing saga, forever...And I lost interest in them long ago...Including old crazy Rupert...

Aug 6, 2014 8:54PM
People should spend their precious time picking and  investing in the stock  instead of wasting time and energy  making so much  complaint . I Have been making money investing in the stock market . All the negative things like rate hike , high gas prices , political fight between left and right , recession do not bother me a bit  as long as i can make money .  
Aug 6, 2014 2:02PM
Missing the point.  It makes not one iota of a difference what the "markets" do up or down.  Stop this and that and analyzing, That is done and gone and the only one's doing this are the pundits professing this and that.  Forget about it as it will not change. My sprinklers are on...checking the "yawn" spread.  Have a nice weekend coming, all.
Aug 6, 2014 1:56PM

I did receive an email this morning from cramer - warning of manipulation by the cads and bounders of Wall street ....but thankfully he is there to guide us through the quagmire and into the land of the super-wealthy - all by following his advice ....

I ran it through Google translate from "Cramerish to Truth" and it can back as "just another greedy bast@rd hawking snake oil" ....

Go figure !
Aug 7, 2014 7:58AM

Thought we knew how soon the  money was going to be cut off by the FED...

OMG, what do you mean? They are already doing it?  WHEN did that happen...?

Interest rates, what interest rates.?? Did they really say that could happen maybe later this year;

Or maybe early in 2015...??

Why was that..?? If the Economy get's heated up and U/E drops further...

Or if INFLATION starts to become a problem or out of control..?

Man oh man, you mean they have been TALKING about that for MONTHS on here and I missed it..??

You are trying to tell me that Greenspan is no longer in charge of the FED RESERVE BANK..

When did that change....?

I still think it's Bush's fault, maybe Obama's?....And that Bill Clinton guy might have had a hand in it..?

I had better start reading more of the Articles, and not just the COMMENTS, on a blog.

Aug 6, 2014 3:34PM
The idea of barry scrabbling around very day to get yet another MSN ID just cracks me up -- I can just imagine his massive sweating carcass killing yet another office chair as he angrily smashes away on his keyboard muttering about "leftie DBs" through mouthfuls of extra cheese extra pepperoni pizza, matzo balls and diet coke .....

Watch that heart barry !!! :)
Aug 7, 2014 12:12AM

Russia in there not abiding by any international law, just a state gone rogue??


So US can support Jewish separatists taking land from Palestine and it's abiding by international law but Russia supporting Ukrainian separatists taking their land back is not?  That's pure hypocrisy!

Aug 7, 2014 8:29AM
Stock mkt is nothing more than legalized gaming. Cramer picks stocks like horses, you take your chance and anything can happen (and it does).  Remember Cramer is a stock broker in his simplest form. Stock brokers and bookies are just about gambling. Want to make more money get a second job instead of gambling on things that you have no control over even if you do all your homework as Cramer says.
Aug 6, 2014 4:49PM
Aug 7, 2014 5:56AM
 I only see two factors that will test the market's "strength": 1. how quickly the Federal Reserve cuts off the cheap money supply; and 2.  whether or not the Federal Reserve raises interest rates.  No more cheap money plus rising interest rates equals epic stock market collapse. 
Aug 6, 2014 6:44PM

  Hey! Obama catching up with the curve in Africa. Been reading about business growth there for sometime now. He wants to help. May be opportunity. Oils and miners doing well.

  Here's a telecommunications investor doing well, MTNOY. MTN Group Ltd. Pays 3.85% dividend.  Telecommunications have a long way to go there to catch many other emerging  markets. Might be worth a look. Do your homework.

Aug 6, 2014 2:04PM
Today the markets are trying to go negetive no matter what the news headline is. Wall Street is dead set on giving away all gains so they use every little bump in world events to sell off!! When the gain is gone the marketswill head up again but that will only be regaining losse.s
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