Cramer: Bullish signals that the rally will repeat
Finally! Tuesday called for a real rally that Jim Cramer could sink his teeth into. On top of that, the "Mad Money" host saw many bullish signals that indicate that the fantastic rally could repeat itself.
"I often talk about the setup of a given day...meaning I think you can buy the market for a trade, or I don't like the setup, which, sadly has been the case for ages," Cramer said.
Cramer's attitude finally changed on Tuesday when he concluded that the setup was actually a good one. He went down his list of bullish market signs that indicate to him that we could actually have a strong foundation for this rally to repeat.
First was China , because the "Mad Money" host knows that the U.S. markets are linked to China when things are bad. But as soon as Cramer saw the Chinese market open down 4 percent, he knew this was the maximum fear signal in China that he has been waiting for.
That indicated to Cramer that Chinese investors had finally trapped the short-sellers, which allowed the weak hands to sell. Now real investors could come in with both guns blazing and bring the market back up.
As a result, the Chinese rebound took pressure off the U.S., and there was a rise in the S&P (INDEX: .SPX) futures.
The next bullish indicator was oil when it finally it traded down to the $46 level. Cramer has watched the same old pattern of oil trying to hold its own each morning, only to fail. But the $46 level was an indicator that it finally surrendered and allowed the bulls to mount a rally in oil.
So, with China back in the game and oil up, this was a good setup for a rally on Tuesday. But Cramer hates big openings in the market because it brings in too many sellers. Voila, there was a muted opening.
"I adore tepid openings like we had today, where there is a total lack of belief even in the strength of the futures," Cramer said.
Things got even better when FANG faltered in the opening. Cramer coined the phrase FANG to represent the four market leaders Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX) and Google (NASDAQ: GOOGL). Instead of FANG leading the pack, strong leadership came from two of the weakest groups of the market lately: the industrials and oils.
Woo hoo! The blood started really pumping in the averages then. However, Cramer warned not to get too excited just yet.
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"Before we get too giddy, let's remember that the Fed meets tomorrow, and if it isn't concerned about China and it says it has to raise rates quickly, then the dollar will fly up and all of this positivity will vanish," Cramer added.
Additionally, investors are due to receive oil inventories on Wednesday, Chevron and Exxon earnings land later in the week and don't forget about the rig count. For oil to stabilize, Cramer said we need inventories and the rig count to be down, and Exxon and Chevron both need to report decent numbers.
However if China, the Fed, oil and earnings all cooperate-this could trigger a rally all over again. This positive setup might seem like a tall order to some, but Cramer saw it happen on Tuesday, and thinks it could easily happen again.
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