Friday's rally didn't have to happen

Stocks rose despite plenty of headwinds, so I'm inclined to believe the move isn't finished.

By Jim Cramer Nov 26, 2012 9:44AM
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Image Source Black, GettyWe're seeing lots of grousing about Friday's big rally: It was a day off. It was a shortened session. It was on light volume.

 

None of this means anything to me any longer. The market has been trading on light volume forever. But if you are an underperforming hedge fund manager, you can't tell your investors, "Look, that benchmark moved up on light volume." You can't tell them, "That session that causes the market to go up so much? I mean, it was a half-day, for heaven's sake."

 

I know the averages have once again moved up to resistance, where they have failed and failed again. I know Congress can't be that hard at work, because it doesn't work hard. I also know President Obama has been on the road, rather than hunkering down with key leaders. The fiscal cliff needs to be solved through hard, intense work and momentum, and I feel the momentum has been broken.

 

But when I look at this rally, I think it's been caused by two incredibly important non-U.S. issues: one, the comeback of China and, two, the irrelevance of Europe.

 

Those are huge positives, and if you look at many of the stocks that rallied Friday, they come under the category of "Europe's less of a problem; buy the financials" and the "China's roaring back; buy the industrials."

When I look at these two groups, I am astonished at how little they have done in the last year. They are either unchanged for 2012, or they are down slightly. That's remarkable. They have so much room to run in the absence of bad European news or positive Chinese news, even if the U.S. just stays stable.

 

So while I think stocks have run up a great deal and need to consolidate, I can't be all that pessimistic. Friday's rally didn't have to happen. There could have been plenty of reasons for the market to go down. It could have been worry about weak retail; continued woes from the fiscal cliff; or the fact that there's nothing positive in tech land at all, except for the continued, albeit now-weaker, bounce in Apple (AAPL).

 

But the market rallied nonetheless.

 

That makes me inclined to think this move isn't finished, and that it will force more people in than out, even if those who worry about higher capital gains rates leave the table.

 

Regarding the dividend return after taxes, one look at the hideous performance of the utilities tells you the change in the law has almost been digested already. Yes, these stocks have been performing that badly.

 

In fact, some of them -- the ones that yield 5.5% -- are probably already buys.

 

Jim Cramer's face

 

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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18Comments
Nov 26, 2012 5:47PM
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Since none of us are privy to what level corruption exists between Wall Street and the Federal Government, your header question is irrelevant. It should occur to all now that America is divided between Too-Rich-And-Not-Worth-It and the sum total remaining population forced to live poorly. The obvious is straight ahead... a war we don't need to have, a number of dead and wounded and America exposed to foreign threats. The game is up for the Kool Aid Addicts... go buy a Monopoly Game and play it to the death if you can't see the damage you've done to the rest of us. Go ahead and arm yourselves... history suggests you will hole yourselves up and go insane waiting for the door to burst open. Paranoia will overtake you long before we need to. Wake up, idiots and start doling out cash without rules or stipulations and restore the Chaos that makes America tick. You are mighty sick puppies. New World Order and a False Elitist Class are not in our future.
Nov 26, 2012 5:24PM
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It´s just  media manipulation, people trying to pass the impression that Black Friday sales were great, when the opposite was happening. There are few real investors left.
Nov 26, 2012 4:46PM
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When the fiscal cliff is fixed the market will go thru the roof.Buy now, or regret

later.

Nov 26, 2012 1:33PM
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The very rich control Wall Street and Washington totally, and any benefit to the masses comes only incidentally as a result of the selfish and greedy machinations of those two complicit entities, not from a purposeful effort to help those less entitled, with most of the combined results of their nefarious "activities" being continually and predictably damaging to the balanced operation that our economic system was initially created to equitably maintain, thus their combined activities are no better than economic warfare against the masses and are thus perpetually destructive to our society as a whole.

 It can only end very badly when the top 1% that controls all power in a society is continually and purposefully pushed higher and higher by itself to vastly unfair wealth gains at the expense of  the 99%.
Nov 26, 2012 1:01PM
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oh now europe doesn't matter again...this fool gets worse than

ever....next time we go down because of europe he will expound on how important europe is.

he is ALWAYS  A DAY BEHIND

Nov 26, 2012 12:34PM
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Greece is becoming just an old joke...I'm surprised they are not out the EuroUnion yet, so that we all might move on...

It's better to lose one Country, then jeopardize all of them...Kick'em out.

 

Let them print Drachmas. They will make pretty wallpaper..

Nov 26, 2012 12:30PM
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"Friday's rally didn't have to happen".  Neither did hurricane Sandy, but it did.  Nuff said.
Nov 26, 2012 11:47AM
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Stocks fall on Greek uncertainty ? Who cares about Greece ! We have our own problems in this country and cant fix thanks to our outstanding elected leadership who could not find there way out of a toilet !  TAKE YOUR MONEY AND RUN !
Nov 26, 2012 11:29AM
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Fridays rally was a contrived short trap, period!  The scream of unfairnes was once again falling on deaf ears.  Wall Street clearly took advantage of those unsuspecting folks who left Wednesday without covering their shorts.  If you are a bull and think this was somehow funny just wait.  You will get your taste very shortly. All anyone should take away from Friday was that Wall Street is still as corrupt and manipulated as ever.  For those few souls left that think this massive monopoly will ever learn anything but that what is there is theirs for the taking then God Bless.  This beast  is eating itself and all the values and trust it ever could amass. There is no confidence any longer that these folks are anything but backstreet bandits who will do anything to get their hands on our money. You would; as a normal honest person, think they could identify this percieved weakness and somehow find a philisophical foundation to move forward on.  Don't ever plan on that happening. Yes they have no clue and never will in my opinion.  We need  competition to bring any semblance of honesty or order.  And now to hear these folks suggesting there is an unfaireness a tax change might be to consumers is even funnier. And all you are doing with this piece Jim is covering up the reality that it was a contrived short trap, and trying to pawn it off as anything other shows your complicity.  You know it, I know it, and nothing you or any of the Street Insiders will try to play it off for will change the fact.  It was a fraud!
Nov 26, 2012 11:29AM
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You know darn well what motivates the markets today. 15 years ago there was $50-60 Trillion in currencies worldwide. Today there are at least 3 different currencies- cash, derivatives and debt contracts totaling more than $1 quadrillion. We no longer have economy and as long as central banks of the world can control business (which doesn't do any, it fuels finance), there won't be a marketplace that serves real people. Think about it, Jim... people earn NOTHING compared to the daily returns on nothingness from financial transacting. Paper is everything. It trumps, food shelter security and relationships. Why it still exists is fairly straight-forward... like anything made of paper, one tear or spark ends it. Once ended there is ZERO chance of reviving it because it was never a real thing to begin with. Sorry... but even YOU are worthless and inept without it.

Close the banks. End the Federal Reserve. Get RID of Wall Street. Just 3 weeks until the End of the World as it has evolved. Only a fool doesn't look over his/her shoulder to check on inevitability. Bubbles pop and all they contain-- drops hard and fast. There is no other reaction possible.

Nov 26, 2012 11:19AM
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It's all about EU Greek debt and US Fiscal Austerity. The EU will issue another $32b Euros to fix the Greek crisis for another 3-4 months.  But the US Fiscal Austerity crisis is a little trickier.  In reality what they should do is let the spending cuts and tax increases kick in. That's the best medicine for everybody. However, the markets aren't going to like that and the politicians are not voted into office to do what's best for everybody.  So they'll be some short of squirrelly deal that kicks the can down the road.
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