Let’s break them down:
- The accelerated rise in Treasury yields must slow down. The benchmark 10-year Treasury yield increased to 3.9% on Tuesday, while the 2-year rate rose to 4.7%.
The Fed is battling the inflation they caused by the distribution of unearned money.
- Anomaly stocks that are trading disproportionately high, many of which are in the tech sector, need to come down.
Yes, a lot of stocks became very quickly overextended during the January rally.
- Recession-resistant stocks like PepsiCo and Merck need to rebound, which Cramer said is on its way.
Many benchmark companies would need to rebound.
- Banks need to stabilize. As long as interest rates do not rapidly spike, Cramer said that banks can bring a lot of value by coexisting with higher rates.
I don’t disagree with this. Banks can use this environment to their advantage.
- Retailers need to identify the industry’s winners and losers. He pointed to Walmart, which reported positive fourth-quarter results, versus Home Depot, which released disappointing fourth-quarter earnings.
Since resuming “normalcy,” retailers are rebalancing from massive demands caused by Covid.
- The market needs to be much more oversold as measured by the S&P oscillator, which helps direct investor behavior in times of big upswings or downturns.
I often look at the market on all timeframes being overbought / oversold.
For the first time in quite some time I can align for the most part with Mr. Cramer’s thought process, at least in these 6 comments.
But the question remains: Are we in a bull market sell off or are we in a bear market rally?
I think identifying the answer to that question is more important at this juncture.
Today’s “Chart of the Day” image below displays the SPY, the benchmark ETF for the S&P 500.
I’m going to play both sides of the aisle here for just a moment as this is what I do for my clients. I help them see the data so they can make the best decisions for themselves.
Bullish: off of the October 2022 lows, the market has set a series of higher highs (slightly) and higher lows. The 50 day moving average is now above the 200 day moving average.
Bearish: identifying the big picture, price remains trending from the top left to the bottom right of the chart when looking at several years of data.
Bottom line, in my humble opinion. If price holds at the 50 and 200 day moving averages, which is in line with the current channel structure – we have the chance to rebound higher.
OR if this rally turns out to be part of a bigger picture bear market move, we have the chance to go lower, meaning retesting prior lows placed.