Why did last week's rally fizzle out so fast?

Apparently because it had little substance to begin with.

By Jim Cramer Feb 10, 2014 1:10PM

Market Analyze © Nikada/Getty ImagesThe spell for the year had said, "You had a good run last year, but it's over for now." Did the past couple of days break that spell?


To me, there wasn't much of substance to the rally beyond a bounce at some key levels and the passage of the employment number.


What surprised me Friday was that the rally was able to last throughout the day, even as there was nothing driving it.


TheStreet.com logoWhen the employment number came out, the algorithmic cowboys emerged from the corral with guns blazing. Nobody talks about it much, but can you believe how wrong they were yet how much relevance and gravitas their first moves had with the crowd? It was almost as if they were outrunning a wave of selling.


But there was no wave of selling.


In retrospect, I should have known this, as there was one stock last week that told us all we needed to know: Kohl's (KSS). Yes, the decent discount chain that has been a serial disappointment.


On Feb. 6, the company reported a preliminary earnings number of $1.53 per share when the Street was looking for $1.63. Fourth-quarter comps were down by 2 percent, and the company cut its forecast. The stock looked down big. Just like futures on Friday.


Then Kohl's sprang back to life and rallied up $2. That was it. That was the sign that not only was retail overdone to the downside but that the entire market, which had been led down by retail, could recover.


That was the signal. A not-so-hot retailer reports a not-so-hot number and the stock goes higher?


Then we got the twin down openings of General Motors (GM) and Cummins (CMI) that then morphed into higher prices.


Same deal.

In the following 24 hours we had a dozen companies reporting news that should have driven their stocks down, and instead they went higher.


Then the market was off to the races.


There's only one problem: The relief trade can't last without good data ahead, and I can't see any -- at least not yet.


Plus, the indexes are leaving the oversold territory that had helped so much.


We'll know soon whether the bounce can continue. I see a host of retailers reporting that could let us down. If they bounce, it is game on. If they react rationally and go down, then the market should retest.


Jim Cramer headshot


Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners. At the time of publication, the portfolio was long GM and CMI.




More from TheStreet

 

89Comments
Feb 10, 2014 1:31PM
avatar
In other words technical trading; programmed from previous market action, dictated an oversold market and reacted.   Later in the week the Fundy's will look at the real world and selling will more than likely resume.   Stocks need growth like people need water.  Anyone seen any loose growth laying around?  Forget any housing or jobs recovery.  Way too many difficulties and now Asia is contracting.  You can't run from reality forever.  Bad moon rising.
Feb 10, 2014 1:44PM
avatar
Why? Because there is no reason at all for them to be up!
Feb 10, 2014 3:17PM
avatar

it's just a dead cat bounce - and it was only off an awning - we haven't come CLOSE to the ground yet!  Printing money and calling people "employed" if they take a much lesser job or quit altogether looking is NOT cause for the stock market to go up.  Eventually, after all the cutting and restructuring...you still need people in good jobs to buy, build, and consume. 


When we get back to some real numbers that reflect we've not made much - if any progress - in our overall economy and the jobs outlook from the bottom....then the market will be fairly valued once again.



Feb 10, 2014 3:15PM
avatar
What rally?  You mean the trickery employed by this thoroguhly incompetent administration???  No, that is not a rally.  That will just make the correction that much more painful!  
Feb 10, 2014 3:03PM
avatar
Wait and see what happens when the welfare payments from the Fed stop.
Feb 10, 2014 2:07PM
avatar
Jimmy, you just completed a article about the massive accelerated $14Billion dollar stock buyback by Apple in the last few weeks yet you say there isn't anything to prop up the Markets. The biggest thing propping up the Markets has been massive Buybacks thanks to low rates and the Tax Advantage. Yet today, you and others want to be naive about it.
Feb 10, 2014 1:57PM
avatar
"In retrospect, I should have known this" .......... The story of your life Bobo.
avatar
Gee if the market was based upon real main street conditions it would be about Dow 100 Nasdaq 10 and S&P 1 right now

The US economy is gone -- zero not there anymore.

The only thing that is keeping the stock market near record highs is QE3 and the feds have spent $4 trillion dollars with nothing to show for it on QE projects. Once the fed removes all QE3 the market is tanking to near zero as RETIRED PEOPLE ARE TAKING MORE MONEY OUT OF THE MARKET THEN WORKING PEOPLE ARE PUTTING INTO THE MARKET!!!!!!!!!!!!!!

Get that concept into your heads people the supply of stocks is sky rocketing as more and more baby boomers lose their jobs or retire and sell stocks to live on. The demand for stocks is tanking as 60 percent of Americans now work at minimum wage jobs and are not putting anything into the market.

Soon the Fed will be dumping it's $4 trillion dollars in the stock market and bonds back unto the street as they know they are going to take a complete loss on them if they keep them more than a year. How do they know they know they are going to collapse the US dollar by Sept 15, 2015

Pretty much everything you thought you knew about the economy will disappear and be replaced by a huge black hole.

That is why the rally can not go on anymore.

Feb 10, 2014 4:49PM
avatar
LBJ:
We were attacked (in the Gulf of Tonkin)
 
Nixon:
I am not a crook
 
GHW Bush:
Read my lips - No new taxes
 
Clinton:
I did not have sex with that woman... Miss Lewinski
 
GW Bush:
Iraq has weapons of mass destruction
 
Obama:
I will have the most transparent administration in history.
The stimulus will fund shovel-ready jobs.
I am focused like a laser on creating jobs.
The IRS is not targeting anyone.
It was a spontaneous riot about a movie.
If I had a son.....
I will put an end to the type of politics that "breeds division, conflict and cynicism".
You didn't build that!
I will restore trust in Government.
The Cambridge cops acted stupidly.
The public will have 5 days to look at every bill that lands on my desk
It's not my red line - it is the world's red line.
Whistle blowers will be protected in my administration.
We got back every dime we used to rescue the banks and auto companies, with interest.
I am not spying on American citizens.
ObamaCare will be good for America
You can keep your family doctor.
Premiums will be lowered by $2500.
If you like it, you can keep your current healthcare plan
It's just like shopping at Amazon
I knew nothing about "Fast and Furious" gun-running to Mexican drug cartels
I knew nothing about IRS targeting conservative groups
I knew nothing about what happened in Benghazi
I have never seen my Uncle from Kenya who is in the country illegally and that was arrested and told to leave the country over 20 years ago
And, I have never lived with that uncle. (He finally admitted today, [12-05-2013] that he DID know his uncle and that he DID live with him.)
 
And the biggest one of all:
"I, Barrack Hussein Obama, pledge to preserve, protect and defend the Constitution of the United States of America."
Feb 10, 2014 4:09PM
avatar

You want this economy to grow at 4 to 5%.


1. Final consumption taxation only, no item or person exempt.

2. Give the American people the direct right to decide what they want their tax dollars spent on. (by pass congress and the president).

3. The federal reserve must maintain an honest and accurate CPI. Then keep the real inflation rate between a deflationary 1% and 0 inflation.


This will move jobs and money to America and reduce the cost of government!! Turning our economy around is simply, what is missing is the moral structure, the guts and the intelligent to get it done.


Feb 10, 2014 3:40PM
avatar

Apparently because it had little substance to begin with..........really???

there hasnt been substance in f-in YEARS yet u and the cnbc cheerleaders

"market is off its lows, its only down 250 now" mentality tells the sheep all is well.

 

MONEY manipulate the markets when ever it wants......without substance.......

Feb 10, 2014 4:08PM
avatar
Large corporations are buying their own stock...with cash and borrowed money (and why not, at zero interest) which makes the Dow swell….like a fat man at the all you can eat buffet...but those numbers really have NO value to the common person on the street…who is struggling.  
  So the Federal Reserve keeps feeding the fat market man…..and all is well they say...except in reality, that recovery illusion down on main street is showing a lot of holes...and honest people are beginning to question what they see, vs what they are told.   The house of cards is beginning to crumble..
Feb 10, 2014 4:04PM
avatar

 

I'm investing my money in black felt marking pens.  Derelicts buy them all the time to make their begging signs on cardboard.

 

 

Feb 10, 2014 5:13PM
avatar
YOU KNOW YOU ARE LIVING IN A COUNTRY RUN BY IDIOTS:

WHEN GOVERNMENT EMPLOYEES STAND ON THE FIFTH WHEN BEING QUESTIONED
ABOUT THEIR WORK PERFORMANCE!!!!!!!!!?

THEN THEY KEEP GETTING PAID - -   AND FINALLY TAKE THEIR RETIREMENT AND PENSION (YOUR MONEY)!!!!!!!!!!!!!!?!!!!!!!!
Feb 10, 2014 3:26PM
avatar
the market isn't about jobs.........the market is about how low you can pay your slaves and how much money the fed prints for you............NONE of the stimulus goes to the folks...........ALL of the stimulus goes to the balance sheets of the billionaires
Feb 10, 2014 2:43PM
avatar
I've talked about a compressing economy for some time now and forgot many don't understand exactly what that means.  Hopefully this might help.
Economic Indicators
By On March 1, 2010 ·

Prices, costs, and markets were never devised to tell us how we’re doing in a world in Compression, and effects may take years to become so severe that no one can mistake them.

The obvious indicator is energy prices. Petroleum spot prices of $60-$90 a barrel seem normal now. As oil becomes harder to obtain, one can expect its price band to slowly rise. Supply-demand burps map into only $20-30 a barrel variances, but if terrorists suddenly, say, blocked the Strait of Hormuz, oil prices would race toward $200 a barrel overnight. Industrial economies would suddenly invoke allocation schemes (rationing). Such scenarios are easy to concoct; terrorists can devise them too.

More subtle is global monetary systems sputtering to prime growth that won’t take off. The financial bubbles and faux market scams of the past decade may be early indicators of this effect. In the absence of strong policies to offset it, one would also expect a skewing of income and purchasing power to a smaller upper class. Those with money enjoy increasing use of resources, while most others, relegated to Wal-Mart shopping status, try to buy as cheaply as possible. That’s a system running down into commodity traps.

Unfortunately, expansionary economic thinking is apt to regard this development as a social fairness dispute, easily understood and easily inflamed, than as a sign that something more fundamental needs attention.

 
Feb 10, 2014 5:08PM
avatar


        In 1887
        Alexander Tyler, a Scottish history professor at
        the University of Edinburgh, had this to say about
        the fall of the Athenian Republic some 2,000 years
        prior: "A democracy is always temporary in nature; it
        simply cannot exist as a permanent form of
        government. A democracy will continue to exist up
        until the time that voters discover that they can
        vote themselves generous gifts from the public
        treasury. From that moment on, the majority always
        votes for the candidates who promise the most benefits
        from the public treasury, with the result that every
        democracy will finally collapse over loose fiscal
        policy, (which is) always followed by
        a dictatorship."
        "The average age of the world's greatest civilizations from the beginning of
        history, has been about 200 years. During those
        200 years, these nations always progressed through
        the following sequence: From bondage to
        spiritual faith; From spiritual faith to great
        courage; From courage to liberty; From liberty
        to abundance; From abundance to complacency;
        From complacency to apathy; From apathy to
        dependence; From dependence back into bondage.

        

        "The Obituary follows:
        Born 1776,
        Died 2016
        Professor Joseph Olson of Hamline University
        School of Law in St. Paul, Minnesota, points out
        some interesting facts concerning the last
        Presidential election:

        Number of States won by:
        Obama: 19 Romney: 29
        Square miles of land won by:
        Obama: 580,000 Romney: 2,427,000
        Population of counties won by:

        Obama: 127 million Romney: 143 million

        Murder rate per 100,000 residents in counties won
        by: Obama: 13.2 Romney: 2.1

        Professor Olson adds: "In aggregate, the map of the territory
        Romney won was mostly the land owned by the taxpaying citizens
        of the country.

        Obama territory mostly encompassed those
        citizens living in low-income tenements and living
        off various forms of government welfare..."

        Olson
        believes the United States is now somewhere between
        the "complacency and apathy" phase of Professor
        Tyler's definition of democracy, with
        some forty percent of the nation's population already having
        reached the "governmental dependency" phase.

        If Congress grants amnesty and citizenship to twenty million
        criminal invaders called illegals - and they vote - then we can say
        goodbye to the USA in fewer than five years.

        If you are in favor of this, then by all means, delete this message.

        If you are not, then pass this along to help everyone realize just
        how much is at stake, knowing that apathy is the greatest danger to our
        freedom..

        The Democrat Party, with the licentious "leadership" of an incompetent fool, has achieved placing 47% of the population into government dependency, and has found ways to multiply their votes while subduing the votes of others.  MHO!

Goodbye, USA. You were the greatest!
Feb 10, 2014 4:40PM
avatar

You have to look at it like there are two pools of money floating around out there right now.  You have the real money that was earned and you have the gambling money that was created by the Fed.  The real money pool is what was here after the correction in 08.  That's where things settled before the Fed started trying to blow another bubble.  The real money doesn't move much but the gambling money moves every day.   All the money that the Fed created essentially went into the markets and have taken us to where we are today....another bubble.  I thought things were starting to make sense when the market was dropping but apparently, the algorithms have hope that Yellen will reinstate QE3.   I wouldn't think there is much chance of that but in this bizzaro world anything is possible.  The fact that the job creation number (if you believe such things) was so bad and the market went up tells me that the insiders think Yellen might start the presses again.  


You can talk all you want about earnings and revenues surpassing their (reduced) expectations but the market movement is just the gambling money moving back and forth into the market.   It's not about fundamentals it's just about Sachs trying to beat Morgan's computer.   They've got trillions of dollars of free money to play with and they just play chicken with each other every day.  Whoever gets out before a correction wins.  Everybody buys back in and the game starts again.  

Feb 10, 2014 5:15PM
avatar
A politician is a fellow who will lay down your life for his country.
        ~ Tex Guinan~
Feb 10, 2014 5:14PM
avatar
Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other.
        ~Oscar Ameringer~
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.