Are you sitting down? If you invested your euros in the Italian stock market index, the year that Italy is supposed to file bankruptcy, you are now up on your investment. That's right. You are profitable.

Spain? Look out. That market rallied another 1.85% today on top of Thursday's 4% gain.

These are some of the biggest moves I have ever seen. They are emblematic of small-cap stock short squeezes, not bourses of major nations, including one with the third-largest bond market on Earth, Italy.

When we look back at this remarkable rally in our nation, we will see a few things that will shake us, including those of us who talk and write about the stock market for a living.

First, we had been told endlessly that we couldn't really rally with QE3. Or we hear that this rally is based on QE3. Or we hear that the market only goes up on the Federal Reserve. Go check the minutes. That's just not true. The people who opine on these matters won't acknowledge this, I believe, but the Fed wasn't part of this and no tip to the media, no speech, or no wink and nod had anything to do with it.

Two, the fiscal cliff chatter? It did a terrific job of making everyone sell. I don't know if it will be resolved or not, but I do know that if you came in now, you missed a fabulous rally. Again, just a fact.

Three, there was no real change in claims or any other data that signaled this rally. Nothing. Not one piece was really all that good except some homes data, and most people still don't even believe that prices for homes have stopped going down. Either way, we are still building very few homes, so the turn is off a small base.

No, what happened is that Germany relented. Germany held the whole world hostage for months. They held it hostage because they were fighting Weimar when they were really fighting the deflation that gripped the world from the Depression.

They were selfish fools. They were stupid. And the only thing that should give you pause about this rally is that they are fickle and they could change their minds.

This is a rally based on the Europeans' ability to deal with their problems, not solving them. Many big money investors didn't even think the Europeans could deal with their problems, let alone would deal with their problems.

It looks like they can. That's the spark. Doesn't mean they will succeed, but it does mean they can try, and that's actually reassuring from where we were a couple of months ago. Enough doubts have been resolved that they are not suicidal, that they will address the problems, that people are buying.

In other words, our rally is based on the European stock rally, which signals the worst is over.

In our country, the rotators have left the defensives and piled into the techs and the industrials as long as they don't have too much China, which is still in the not-able-to-deal-wit​h-problems cloud.

There are still tons of values in this phase. Retail may have run too much for now, but anything connected with housing, autos, aerospace, (non-fiscal cliff) oil, tech, chemical, wood or exports is going to get money from the bond market -- the bond market being the great repository of money that thought the Europeans wouldn't get it together and another Lehman would ensue, except, as the bears always told us, it would be ten times worse than Lehman.

So, you can listen all day to those who make a cottage industry about Ben Bernanke or employment or Washington, in general.

The big multiple compression and the big earnings shortfalls, though, were caused by the European economies.

And their stock markets tell you that better -- not happy -- but better days will soon be here again.

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.

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