Looking to buy? Wait for the all-clear

We're now seeing a bottoming process we've seen time and again. At a certain point, we'll see a shift as everyone realizes the panic has passed and the sellers are done.

By Jim Cramer Mar 25, 2014 11:35AM

Traders work the floor of the New York Stock Exchange © John Moore/Getty ImagesHere's what happens next. The analysts, who have watched their high-multiple stocks get wrecked, soon won't be able to take it anymore. They'll get tired of the phone calls. Tired of playing defense. They won't want to be on the hook for BioMarin Pharma (BMRN) -- notice the Goldman downgrade last night? -- or Concur Tech (CNQR) or Isis Pharma (ISIS). They know the gains are going away, and they simply can't take the pain.


So they'll downgrade.


TheStreet.com logoAt the same time, the short positions, which hadn't been that big, grew by leaps and bounds Monday and Friday, so the base is in for the downgrades. We could get a combination of an aggressive wave of selling, plus some short covering, and then some intraday upgrades that work. Not yet, though. We need to lose adherents in order to get bottoms.


Right now the analysts are panicked. They are trying to figure out what to say -- what could reverse the waves of selling. They realize now that they should have downgraded before. They know they missed the top. But they look at where the stocks have gone year over year, and they notice that they are still up on their recommendations and they figure: Why not pull them? There are no real catalysts that they can see that would turn these around.


This is all part of the bottoming process that we have seen time and again in the momentum stocks. At a certain point -- not until you get that action that comes from a knockdown by a downgrader -- comes a whoosh in which volume expands, clearing out all of the sellers to speak of. Then the stock trades up to where it opened and then even higher, closing nicely in the black. That's the sequence. When that happens the next day? You get a gap up from the get-go as everyone seems to realize at once that the panic has occurred and the sellers are done.


What's unfortunate right now is that the sellers simply can't seem to finish up and there's no real panic. The stocks get pounded, and then they come back from the low but not enough to get in the black. That just emboldens new sellers tomorrow, as all of these managers know the same thing I know.


Without the downgrades, you run the risk of having a stock rally ever so slightly, followed by a downgrade that will rip your face off. That's why it is always better to wait for the all-clear that the downgrades generate.


There may be a handful of high-multiple stocks that won't be downgraded, and I include Priceline (PCLN) and TripAdviser (TRIP) in those. They can go down, but the analysts aren't going to desert them. Those are the first two I would recommend picking at today if you have done no buying.


The rest? Let's see the pattern unfold. If it doesn't, no rush. No need to be a hero.


Jim Cramer headshot



Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners.





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74Comments
Mar 25, 2014 12:34PM
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Wait for the "all clear"...WTF??  We are not waiting at a Railroad Crossing...

I think Cramer is full of poop, well actually he probably is..?

Mar 25, 2014 12:11PM
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Time to take some profits and plan a Summer vacation where it's warm.
Mar 25, 2014 12:00PM
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The Lemon Drop Kid is at it again .....in the last week he has "tipped" pretty much every possible eventuality for the markets ....if it's up in a few months he will refer back to this one with some weasel words such as "when I gave the buy signal back in later march ...." or if the markets down he will refer back and say ....."as I cautioned in this piece back on march 24th ......" 

And really cramer are you not a analyst and/or a pundit ...perhaps we could call you ana-lpun???
Mar 25, 2014 1:32PM
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........ with an oink oink here and a har har there...... here an oink there a har..... everywhere a yuk yuk....... fatty lives in a funny farm e i e i o

Mar 25, 2014 12:59PM
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Got a kick out of Moochella scolding the Chinese about an open and free media such that the citizens can be apprised of what their Guberment is actually up to.  Those folks have to just be shaking their heads at us.  Being smart and being wise are two very separate and distinct traits.  We have many with opinions that are emotion based but I think opinions based on common sense with a solid philosophical foundation merit more weight.  I guess everything in public is just an act anymore.  Remember the eyewitness who saw the Airliner crash into the sea and the two Chinese scientist monitoring the seismic equipment register a seismic event exacting at the time and location of the eyewitness?  Guberment officials said there was nothing there.  They are all doing nothing more than rewriting reality to keep folks from panicking about a missile stolen from the Benghazi Embassy shooting down a commercial airliner.  I bet if you went and hired an aircraft you couldn't get within ten miles of the spot where the damn thing really crashed.  But they successfully sent everyone into the Indian ocean and my bet is that is where the story ends. Oh the Ocean is just too deep but we are sure it's there because the French say it is. My bet is those that shot it down are not getting the press they want and will probably do it again soon. JMHO
Mar 25, 2014 3:28PM
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When Ms. Bambi used to be on the Farm...She snagged the barbed wire, while her and Fats tried to escape....

There was one big woooosh, as she flew out of sight over into the neighbor's pig pen...

Then the hogs ate her....And choked on the plastic..

Fatty just sat down and cried...

Mar 25, 2014 3:43PM
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Did you hear the one about Bobo at the Grocery store?...Too funny.

Caught in produce section, fondling the fruits...

Mar 25, 2014 11:57AM
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stocks going up.  I bet my mutual fund money from last week's payroll is being spent. 

 

~ boy, aint I powerful to be able to sway markets like that?!?!?!

Mar 25, 2014 6:28PM
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the problem is that colluded banks that used by Obama to inflate stocks of his financial supporters with people's money now have a problem.Due to sanctions and ukarine problems many Russian companies are not going to pay their debts to usa banks.what the banks doing selling inflated stocks to increase cash position so they don't go out of business same as 2007.thats why speculative stocks are down but good solid stocks like proctor and gamble exxon are not moving and even some are up
Mar 25, 2014 6:18PM
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It all just sounds like another crap-shoot to me.
Mar 25, 2014 3:52PM
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There is absolutely no reason for our economy is not growing at 4%, 5%, 6%. The economic technology is available to get it done. Why the hell congress, the president and the fed haven't accomplice this is nothing more then treason. The incompetents of American leadership is unbelievable. Why are we as Americans allowing this to happen????
Mar 25, 2014 1:53PM
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Priceline & TripAdviser?  Wow Jim, you really 'went out on a limb' there. Could it have anything to do with summer vacation bookings? Ummmmm !!

Mar 25, 2014 3:39PM
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Jimmy we were selling some of our Railroads this morning...

We did pass Go and made a decent return....Collected over $200...Then landed on free parking..


But I'll wait for the "all clear" from you and CGT....And maybe buy something with freed up cash and some recent divvies...

Look's like the scumbags is making a run at it...Go scumbags..!!


Mar 25, 2014 5:10PM
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not a single mention of corporate current or future earnings ... wow ...
Mar 25, 2014 5:37PM
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If Cramer says wait to buy, we should have a nice 400 to 500 point rally on the DOW next week.
Mar 25, 2014 12:14PM
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Good solid advice from Jim.  Common sense learned from walking the walk.  I have no confidence in the direction right now but it seems the Bull has some scrapes and his knees seem a little weak.  Layoffs seem to have added to the bottom line lately and coupled with higher prices in the emerging markets make it some what suspect that these profits levels will continue a whole lot longer.  Share buybacks coupled with rosy profit predictions seem to be running out of steam as well.  I suspect deflation is the biggest concern with the FED but I sense they have given up on low interest rates and bond buying being the answer. After some four years of goosing the markets it doesn't appear to have helped but mostly harmed main street.  Perhaps some new tea leaves in the FED tea ball might work.  Maybe historically higher interest rates are the nemesis to stock prices but who knows maybe that will keep us from falling into the Japan style of stagflation most of us see as the new future for America.

Mar 25, 2014 12:44PM
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Looking beyond the cooked financials... does anyone in a hiring position have actual ability or are the purely administrative and bureaucratic? If so, steer clear, the ranks are infested with alumni, not skill or competence. Does the business sell anything to the random public? If not, they thrive on kiting and have no genuine enterprise capacity. Is there a "fix-it" person bailing ignorant decisions? Steer clear, those folks must be exhausted by now. Virtual-- process component? Pass through to something else? A distraction or counterproductive social pariah? PASS. Those doors aren't leading anywhere good. REITs... what do you do with homes nobody can afford or the mall boxes no one shops at? Every fund that simulates real activity via certificate or web activity is a racket.
Looking at Reality... there is actually a LOT of opportunity for the savvy. Walk away from organized failure and look for what you remember working that isn't there now and revive it. Time is running out. Game tokens are not real currency. 
Mar 25, 2014 4:32PM
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Well, we sure seem to have the same pattern week after week and I bet you are going all in but I look at this pattern as a big warning sign and so should you! We are just prolonging the inevitable folks and if you want to gamble, well go ahead with that but good luck!
Mar 25, 2014 3:17PM
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They're coming to take you away har har .......... They're coming to take you away yuk yuk oink oink har har........ to the funny farm

Bye bye fatty.

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