Cramer's 10 steps to a market rally
Ever since the top of the market formed with Alibaba (BABA) going public, it seems everything that could go wrong has. The rally on Monday was short-lived, as the S&P 500 (^GSPC) closed down at least 1 percent in three consecutive sessions. The Dow (Dow Jones Global Indexes: .DJI) Jones industrial average fell 223 points, or 1.35 percent and the S&P 500 fell 31 points, or 1.65 percent.
"Mad Money" host Jim Cramer reiterates this is a treacherous market-as the market couldn't hold even after the Fed indicated there is no hurry to raise rates; there was a good China export number for September; and there were peace rumblings in Ukraine. So rather than join the panic, Cramer gives his fans 10 steps of how to stem the market.
No. 1 Containment of Ebola
The fear has become so strong that some are expecting a SARS-like cut back in travel, and that was an airborne contracted pandemic. Ebola is bringing a sense of panic, especially when the lead story in the Wall Street Journal is "Ebola Case Puts Focus on Safeguards." Likewise, American Airline (AAL)'s stock peaked in June at $44, and has been going down since then and is now at $28. Cramer thinks it's reasonable to presume this gain for American Airlines could disappear because there has been so many conflicting reports. If there is another Ebola victim, he says we could be down even worse from these levels.
No. 2 Level the playing field
Cramer thinks it's time all stocks get hammered, not just industrials and oils. There are some safe stocks out there that are very close to their 52-week highs. There's no place to hide in a genuine selloff though.
No. 3 Wrench speculation from the market
Speculation needs to be wrenched out of the market, and the "Mad Money" host thinks that is happening right now. The cult stocks like Tesla (TSLA), Netflix (NFLX), Mobileye (MBLY) and GoPro (GPRO) are getting hammered as well. That is essential for a bottom.
No. 4 Oil to find its footing
Normally it would be terrific if oil were going lower, but in the environment of Ebola constraining travel; oil has to find its footing. Cramer fears the chaos created by hedge funds and believes the bounce in oil futures on Monday are not long-lasting.
No. 5 Stabilization of the giant tech wreck
Internet, personal computer and cloud plays must stabilize. With Microchip' (MCHP)s preannouncement, this implies a corrupted tech food chain, especially because of the weakness in China. It was a big surprise when investors learned semiconductors had not done well in September, as in the past it has been much different. It was a brutal surprise when it even took down social media, disk drive and semiconductor capital equipment stocks. Cramer is watching to see if the bounce in semiconductors holds.
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No. 6 End to sanctions between Russia and Ukraine
Sanctions between Russia and the West over Ukraine need to end, Cramer said. Simultaneously, he thinks German Chancellor Angela Merkel has to say, "We are willing to run a deficit to get Europe growing again." Without the end to sanctions, the dollar will stay strong and earnings will continue to be weak.
No. 7 A beat in earnings
Earnings need to keep coming through, according to the "Mad Money" host. Not just in-line numbers, but they need to be beats and raises.
No. 8 Flush out the technical damage
The technical damage needs to run its course. The market is breaking support levels, causing tremendous pressure, particularly in the Russell 2000. "I can't see a support for that index anywhere. Same with the formerly strong retailers, and, perhaps worst given the low interest rates, and housing stocks. That shouldn't be happening. Nor should the chemicals be getting hammered like this with their raw costs so low. Again that could be thanks to Europe," Cramer added.
No. 9 China Stimulus
China has to come out with a dramatic stimulus plan that requires raw commodities to be bought, Cramer said. That doesn't appear to be in the cards, but investors really do need a rally in commodities as it seems we are headed into a worldwide recession that will overshadow the strength of the U.S. economy.
No. 10 Stop the ISIS Crisis
The crisis with ISIS must show signs of being stopped, before more damage is done. Otherwise the potential fall of Baghdad would be a major bow to U.S. foreign policy and consumer confidence.
"The bottom line is pretty clear: We need these 10 boxes to be checked if we're ever going to get a rally that is genuinely stable," Cramer said. Otherwise another relief rally could just be a chance to kick up investors feet and sip an umbrella cocktail for a day, and nothing else.
Call Cramer: 1-800-743-CNBC
Questions for Cramer? madmoney@cnbc.com
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