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.

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Feb 10, 2014 1:31PM
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
Why? Because there is no reason at all for them to be up!
Feb 10, 2014 3:17PM

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
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
Wait and see what happens when the welfare payments from the Fed stop.
Feb 10, 2014 2:07PM
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
"In retrospect, I should have known this" .......... The story of your life Bobo.
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 4:09PM

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

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
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


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 3:26PM
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
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 4:40PM

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 2:55PM
We had TWO DAYS of Fed-pumped euphoria for the Kool Aid crowd. We've had WEEKS of Reality trying to demonstrate the FACT that we have no economy. Business platforms aren't real. A bunch of administratively-ope​rated inherited gambling casinos are anti-American at best, terrorists more likely. FLUSH THEM OUT... let's get our currency moving through Main Street. Use military force if necessary. The Dow has another 15,750+ points to go before it even begins to represent it's true worth to America. What the Hell... deadbeats clog our American Way like cancer. Let's initiate some Chemo and irradiate them out of existence. 
Feb 10, 2014 5:23PM
Who cares ?    Most people are moving on to their own off the books businesses.

The markets are a giant institutional masturbatorium.

Feb 10, 2014 4:06PM
I could believe this.  Obama been doin the dirty with Beyonce.  No that is a rumor we should all run with.  This will make up for the fake war on women.  Give the little garbage mouth a taste of his own medicine. What goes around, well u know
Feb 10, 2014 3:11PM

WHAT....Fizzle out ?....We are not seeing ANY fizzle out, we don't need no stinkin' fizzle outs...

It's a great day in the Markets...

What are they attempting to do?   Warn Janet Yellen ?  Boooyah !!

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