The market was right all along
There's a reason stocks kept rising last week: China's revaluation of the yuan.
By Jim Cramer, TheStreet
The market knew something, all right. That persistent bid underneath that we all sensed, we all felt, turned out to be dead right.
I thought it might be because the euro was holding. Or because the Spanish banks had at last broken the backs of bearish investors. I thought it might be that employment is getting stronger -- or, more likely, has to get stronger -- because some companies, like General Motors, aren't doing their usual furloughs. I thought it might be the final financial regulation rules and how they wouldn't be that onerous.
I didn't think it would be China, because I already checked off the Chinese recovery box last week -- one of the key props I needed to see before we could leave the 2010 bear market behind.
The market's real smart.
In all the press coverage this morning of the yuan revaluation, there are two elements. First, this is a really big deal because China is going to keep domestic consumption going while cooling exports. Second, it's not a big deal at all because it's only a 3% float.
To me, the former is all we need to think about right now. We are nearing the end of the quarter, and many companies are totally defensive. All last week I wrote about how we were rallying because the double-dippers were putting money to work and those who expect a worldwide resumption of growth were putting money to work. But even bigger than those streams were the ones on the sidelines -- those who wanted out.
Now I expect that money has to come in, because the quarter is almost over and these doubters must at least look like they are convinced that something good is happening. So they will buy. The defensive buyers might have to switch their buying, or just buy more industrials with the cash they have.
Either way, not enough people saw this one coming, and even though we are wildly overbought -- more than plus 7 on the oscillator -- the buying now will be panicked, except by the persistent bidders. They don't need to panic. They got it right. Or, to put it another way, the market was simply not as perilous as we thought.
At the time of publication, Cramer had no position in any stocks mentioned.
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