Brace yourself for some profit taking
Current conditions are a perfect recipe for ringing the register. The hottest stocks, in particular, could see some real mayhem ahead.
When you see almost any market down 7%, it's pretty shocking -- except, perhaps, in the case of Japan. For the Japanese market, which has been walked higher for months, a 7% decline may not be all that much. This was a market that had been up about 50% year to date, so you are talking about a correction that still takes it down only to a 39% gain for 2013. An artificial market with a real correction should not play havoc with the rest of the world. But when it's in conjunction with still one more disappointing -- not horrendous, but disappointing -- manufacturing number from China, the heated U.S. market can't shake it off.
It's funny -- if the Federal Reserve minutes hadn't been so questioning of Ben Bernanke's bond-buying program, we might actually have had a situation that could have been shrugged off with a 4% correction -- 1.5% from top to bottom Wednesday and then 2.5% if we are lockstep with Europe Thursday. Instead, though, that dreaded fear of Fed tapering is occurring as Europe remains in a recession and as China seems to be headed into a relatively severe slowdown. As a result, this may mean that a 5%-to-7% correction over several days makes more sense.
Hey, if Japan can have it in one day, we could have it in three.
Normally, I would be more sanguine and say, "OK, Japan and Europe and China have nothing to do with the housing and auto recovery in the U.S." But I am cognizant that there's a lot of hot and relatively unsophisticated money that has come in the U.S. market, lulled by the 19-straight-up-Tuesdays-no-real-correction phenomenon. That makes it more difficult to figure out whether it's worth selling down 2% or buying down 2% if the market is going to go down more anyway.
True dividend-yield support after this run is not near enough, as we saw from the horrendous selloffs in utilities and real estate investment trusts over the last few days.
When you layer on that we are about to embark on a three-day weekend -- when people who have ample profits are willing to sacrifice some of them to save the rest of them -- the situation isn't optimal.
My friend Herb Greenberg asked a very good question in Twitter this morning: Do I think the ample cash on the sidelines will now use this correction to come in and buy?
My thinking is "no." Here's why. If these same people didn't like it when the market was up 9% or 11% or 13% or 15%, why would they like it at any of those percentages on the way down? In fact, they will like it less, because the only thing that kept them from abandoning the market altogether was the possibility of falling too far behind the averages. That -- plus what I believe will be a wall of chattering fear, erected faster than the Russians built the Berlin Wall -- will make it very difficult for sidelined money to get on the playing field.
All in all, it's a recipe for ringing the register in a moment of stabilization as people wait for still lower prices before they make any move to get in. Don't forget the zeal of the chartists, who have now become your enemy if you are long. They have never seen so many stocks trading above their 50- and 200-day moving averages, and they will hound that point until the cows come home. They are a reinvigorated enemy of the bull case.
When you combine that with the unsophisticated speculators who have just entered the market, it can all cause real mayhem in the hottest stocks out there -- stocks that have taken their cue from the Fed, and not just the Fed-inspired fundamentals.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.
More from TheStreet.com
Jim a couple days ago it was, "You are dumb if you're not in the market, jump in." Today, it's terms like "Brace yourself" and "Real mayhem ahead."
You make the case for this market, it's volatile on an almost daily basis.
This last run-up for the last few months just doesn't have much volume behind it or much of a foundation underneath it. In a healthy bull run, we get a run up, followed by consistent pull-backs to some semblance of a support level - 5 steps forward, 4 steps back. Gains made are built on solid breadth and volume. A pyramid is a very solid structure, and the more our markets look like that, the better. As it stands now, they resemble more of a tall, thin structure, like a 10x10 building that is 50 stories tall.
Late last week, I predicted 1.276 on the Euro. We came close, but then headed the other way, and the stop-loss triggers kicked in. Still a nice ride down down from 1.315, but back to the drawing board.
House Resolution 807 “A bill to require that the Government prioritize all obligations on the debt held by the public in the event that the debt limit is reached.”
Duh, we pay those idiots to legalize common sense? How about stop funding Christian Crusades?
Fatty you stick with your predictions, I'll stick with mine...
BTW....It's between 7 and 10 a.m. every morning....Here smell this.
Bullshidt...Japan spooked itself....With a little help from our FED...
I've been Charting Japan along with others for years...
You don't have to run any fkn numbers, if you have been following what has been going on in Japan over the last couple of months, changes in the Political climate and Leadership, along with Greenspan type Stimulus....They were setting themselves up for what is happening.
And a little bullshidt out of China and here we are Today or the last couple of days..
We have been running on the "back of a bull" for about 4-6 weeks now...A typical cycle.
Therefore using the FED for an excuse and the "willy-nilly" bullshidt out of Asia and then Europe;
We have "manipulation and profiteering" at it's best...With trends still inplace.
Looking at the "recovery" after the scare this A.M....I'm right, you are wrong.
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.
The solid report comes a month after the retailer closed all of its Canadian operations.
VIDEO ON MSN MONEY
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.