6 reasons stocks are stuck
Without a decrease in unemployment, stabilization of Spanish banks and an end to the oil spill, rising stocks are just selling opportunities.
By Jim Cramer, TheStreet
The market mocks us daily. With Europe and oil both coming down, we want the futures to come down with them. After Tuesday's brutal session -- when a ton of money went to work and then disappeared in the ether -- we don't need to be skunked again.
So what do the futures know? That the last half hour was "phony" as I have been saying? That we can ignore Europe, as it is simply catching up to our downside? That Tuesday’s banking and tech gains can override the weakness in Banco Santander and BBVA (BBVA)? That the euro seems to have a hard time going through 122, perhaps because of central bank buying? That China didn't go down or that the Aussie mining tax is going to be less onerous than we thought?
You add these up and I think you get nothing, nothing that is worth keeping stocks for. Remember, we need to see a number of things happen for a solid move up.
1. We need to see the fine print for financial regulation. We don't want someone sneaking in and putting a horrific excise tax on some element of banking or a freeze on activities meant to hurt JPMorgan Chase (JPM), Morgan Stanley (MS), Goldman Sachs (GS) and no one else.
2. Spanish banks must start to stabilize. These are the canaries in the coal mines, and they need TARP and they need to cut their dividends. Unlike the National Bank of Greece (NBG) and Aillied Irish (AIB), the Spanish banks of Santander and Banco Bilbao are huge and of global importance; they have a Royal Bank of Scotland (RBS) /Citigroup (C) feel to them. Just remember how badly the world reacted when those two were in trouble. These are not tip of the iceberg names -- they are the icebergs.
3. Unemployment needs to go down. Let's be obvious about this. A bad Friday number is going to pressure President Obama to do something to create jobs -- but if they haven't created jobs yet, they aren't going to. So there will be the usual recriminations about how the banks are the culprits, and that group will be kicked in the butt again. At least it is getting predictable: Just blame private industry. It is the opposite of the previous regime in every way.
4. The oil spill has to be stopped. As long as the ecological disaster continues, 12% percent of the S&P 500 ($INX) is going to get hammered, as the market can't and won't distinguish among the players. The exchange-traded funds are so powerful that they take everything down with them, even though no one except yours truly actually believes that. Maybe that's because I was a trader and I know their power, and I wouldn't want to squawk about them because they might be taken away if too many insiders tell the tale.
5. China has to declare that it is engineering a soft landing, in which industrial output remains high but real estate speculation slows. That would eliminate the bubble talk and make the doomsayers sound silly. Right now, they don't. They sound honest.
6. The euro has to hold this level and the bank spreads among European countries must stabilize. That means no more downgrades of major countries. That relief can only happen when the major powers say that they will not let governments or large banks fail right now, and they will not kick out any countries from the euro. Alternately, if they come up with a policy that cuts some countries adrift to create their own currency and leaves the strong ones to the euro, that, too, will count as a resolution.
I think the latter is going to happen, which is why the German market is unchanged for the year while every other country in the world of import is down, with many in Europe down double digits. Germany benefits from a weak euro for export so it is natural that their export-driven economy is going to do well. But the strength in the bourse is also a reflection that Germany will not be pulled down by the sick men of Europe.
If you fulfill all of these criteria, then we can start buying tech with impunity (NetApp (NTAP), Cirrus Logic (CRUS), Apple (AAPL), Salesforce.com (CRM), SandDisk (SNDK), Cree (CREE), etc.), we can cash in on the retailers that are working -- TJX (TJX), J. Crew (JCG), Macy's (M), for example -- we can buy industrials that have come down a great deal and we, of course, can be more aggressive on the accidental high-yielders.
Until then, when we see higher openings, they are selling opportunities, guilty until proven innocent.
At the time of publication, Cramer was long Apple, BP, Goldman Sachs and JPMorgan Chase.
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Tighter regulations and the end of a lengthy bull market in bonds have changed the landscape forever.
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