Is the market headed for a breakdown?

Probably not, but it could get oversold. Then it will bounce.

By Jim Cramer Sep 27, 2012 8:51AM

TheStreet.com logoKyu Oh, Photodisc, Getty ImagesIs the market working off overbought conditions? Or are we seeing breakdowns in the sectors that have gotten the market this far? Retailers, banks and housing have been stalwarts, and any second-rate chart reader would be saying "Wow, rollover!"

 

The market is at a critical juncture that now finds it too close to the fiscal wall to be able to feel confident about those groups. Those are the sectors that are related most to the shenanigans in Washington, D.C.

 

I have been unwilling to invest based on an idea that everyone knows is coming -- a dramatic decline in federal spending. I have been unwilling to accept the fate that everybody is dreading. When everyone dreads, the event doesn't occur, or it occurs more gently than expected, or it comes about in a different way.

 

At the same time, the market is filled with chartists who now feel the Federal Death Star is upon us. Right now, those people need to keep their gains even more than those who need gains to get back to even with the S&P 500 ($INX)

For the portfolio I co-manage at Action Alerts Plus, it's been stark. Cash has been a killer almost every month this year, especially as this market has been following the European leader. Even after the worst sell-off in two months, by the way, it is important to point out that Spain is down only in the high single digits, Italy is up low single digits and Germany is up 23%.

   

So if you are still raising cash and still refraining from putting money back into the market, as we did Wednesday, you are betting this market is totally changing its stripes for real right now. You are betting that every breakout is a false one, in the groups I mentioned, and that Bank of America (BAC) -- to use the most glaring example -- is never getting to double digits. Of course, you also probably think Apple (AAPL) will go back to test support in the $640s and won't hold, because Apple iPhone sales are miserable -- even though the guys I deal with don't even want to institute a waiting list, because it creates false expectations.

 

My take is that the market is not going to suffer total breakdowns off of a bogeyman that might not come about. It will get oversold, as it got overbought, and then it will bounce.

 

It's just a question of when that occurs.

 

I think it'll be sooner rather than later.

 

Jim Cramer TheStreet.com

 

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 and is long AAPL.

 

 

 

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12Comments
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Hmmm like I have been saying with Bernanke printing an infinite amount of fake monies to keep the stock market going up in the the biggest asset bubble yet we are seeing bleed over into housing where 80 percent of houses are being brought by investors. And those investors are turning over the houses to each other and pushing the prices up the food chain with each roll over.

 

This situtation is not going to end well for either housing nor the stock market.

 

It's as if the central banks want to break up the western economies right now.

 

They could have pumped trillions of fake monies into manufacturing and turned the US economy around on a dime (what ever that means) and we would be having like 7 percent growth right now more than enough to solve the debt crisis and with tens of millions of Americans working solve the revenue income of the government at the same time.

 

Sometimes I think the Federal Reserve has forgotten that targeted money into certain industries is a good thing. Like pumping money into World Comm and letting it build a fiber optic cable system across America and the world which was too expensive and too much for that time period.

Of course World Comm went bankrupt but the real communication companies brought up the fiber optic cables for pennies on the ten dollars and got a real bargin.

 

I am sure that World Comm was set up to fail just to get the fiber optics built.

 

We need the same kind if thinking now just pump fake monies into manufacturing companies and forget about the cost of the manufacturing as those dollars are not important. It's getting twenty million Americans working again and paying taxes to balance the federal deficit that is important.

 

Gee either the people in charge are either stupid or communist agents bent on destroying the USA economy.

 

WAKE UP PEOPLE MONEY IS JUST SO TOTALLY USELESS.

 

We have CEO's making $250,000,000 a year and yet do nothing. We have Chinese labor producing $500,000 worth of goods and only being paid $500 a year for their work.

 

The monetary system is broken and nothing they are doing is fixing it and they are just making things worse by rewarding the very people who broke it to continue to break the economic system.

Sep 27, 2012 1:29PM
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is the market headed for a breakdown? not today........but eventually it will break down and you will claim to have called it
Sep 27, 2012 11:34AM
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There may be secret agreements in Washington to do some can kicking, but they can't kick the can for four years.  That means the recession will arrive in the next President's term in office and they will be blamed for it.  So if President Obama is letting Bernanke go ahead with this, he must be pretty sure that somehow the chickens are not coming home to roost.  But I can't see how that could happen.

 

 

Sep 27, 2012 12:08PM
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Bounce? Not. Crash? Yep. Not over-bought. Over manipulated by "bigs" that are no longer relevant to and in the USA. "Global" was an excuse.
Sep 27, 2012 9:32PM
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IF I KEEP READING YOUR CRAP I AM HEADED  FOR A BREAKDOWN.
Sep 27, 2012 9:00PM
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The markets have been turned into a casino. LinkedIn 1000PE, LULU 55PE, FB 50 PE, AMZN 300PE, CRM no PE trading at 7 times revenue. These are not investments.

 

Now you want to tell people invest.

Sep 27, 2012 10:37PM
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Its amazing that everytime I go on the internet. Somebody is the "expert on the economy and the stock market".  Not to mention that whatever happens today, The Myan calendar says we will all be gone on 12/21/2012.  Ipsofacto. forget what all "the experts say" and do what your gut tells you, if it worked in the past then I guess it will work in the furture.
Sep 27, 2012 4:24PM
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Well now.  Getting back to those roosting chickens.  I gave Ed Hochuli a call and asked for his advice.  He said it gets down to defaulting on our debt.  But not all of it.  What we'll do is pick a country we don't like.  Our ENEMY <eerie background music>.  We'll announce that for treasuries held by anybody in that country we are no longer going to pay interest and we will not pay back the principal when it comes due.  That will help solve the debt crisis.

 

Then we can sit back and see what the rest of the world thinks.

 

 

Sep 27, 2012 5:32PM
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aluations are reasonable.Don`t believe the bears.They always want to rain on a parade.

The Dow is up 5000 points with Obama.Those bears will still be bearish in 2016 when

the Dow is at 20,000.I can hear the bears saying "we`re headed for a crash".They`ve

been saying that way back in 1982 when the Dow was at 777.Don`t believe the pesimists

who are sitting on the curb.

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