Be cautious with stocks, but don't panic

Sunday night has become 'panic night' as nervous investors give in to their emotions.

By Jim Cramer Jun 7, 2010 9:23AM

Jim CramerBy Jim Cramer, TheStreet

 

What happens to traders on Sunday night that drives them to such levels of despair? How can they send oil down to $69 and the Nasdaq ($COMPX) futures down 22 ticks? What gives? How can they be so, well, wrong?

 

Now it is easy to say "they will be right," but the fact is that the Sunday night futures are some bizarre anti-tell, the sum of all fears, the sense that doom is here and that we will crash Monday. That's why you sell down that hard, because you think we will crash.

 

It's age-old and ingrained. A really horrible Friday will ineluctably yield a much worse Monday. So just get ready for it and blast out everything, regardless of the available news – which included reports of European bankers actually talking about how to save things, and a decrease in the disastrous Gulf spill.

 

I am all for betting against the market when the news turns bad. But when the news is, at the margin at least, somewhat better, I think it is pure emotion. Today could very well be an OK day, but that never figures into the calculus.

We are in some sort of hell right now. That's relatively honest. Buyers of equities are considered knaves and fools. Nobody has a single good reason to own stocks -- which have been revealed as playthings of quant hedge funds that tax the system in a parasitical way and then brag about how they provide liquidity. It's an awful time, a time when extreme caution is warranted.

 

But not panic. Panic just loses you even more money than you would lose anyway.

 

And that's what Sunday night has become: panic night. Even if you absolutely hate the market, which everyone does, perhaps you take the other side of that trade and then go right back to selling and then shorting in the morning.

 

That's a much better strategy.

 

At the time of publication, Cramer was long BP.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

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