Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Friday, January 15.
The average stock in the S&P 500 is down by 20% from its highs last week. No good news seems to matter currently. "I want to talk about the psyche of a bear market so you can understand why nothing is working and the averages can't put together enough of a winning streak to make it so you can get anything but a trading bounce," said Cramer. All looked fine on Thursday, till Fed's Bill Dudley commentary on Friday about raising interest rates with the combination of falling oil price and Chinese economy concerns.
"It's pretty clear by now that the Fed raised rates at exactly the wrong time and without some statement from them saying that they are on hold, we are in a bad way, especially given the nature of today's Fed head's comment," said Cramer. This is not the kind of weakness that one should buy in. "Better to hold on, wait, and get a better moment," added Cramer.
The current selloff is more than 2011 where the US markets are going down due to external factors. The market is in better shape than 2011 since the $300B oil debt can be contained. Hence, there is no point buying in this weakness as the stocks are more expensive than in 2011 and the Fed is not the friend. "This too shall pass," he concluded.
Off the charts
Will the selloff end? Cramer, with the help of technician Marc Sebastian, reviewed the charts of the CBOE volatility index to figure out when the fear gauge will calm down. S&P vs. VIX charts from last August show that the selloff was bigger, faster and scarier then. This time the fear is slowly moving up slowly as the S&P falls.
Sebastian thinks S&P will break down below the August lows of 1,867 and VIX will trade below 30. Until then, the market cannot find a sustainable bottom. The market has to go down more before finding a bottom, and looking at how things are winding up, there will be no quick V-shaped recovery.
Cramer's game plan
Investors will have a rough weak ahead.
Lot of data from China, namely industrial production, retail sales and GDP will be out on Monday. "I don't for one minute trust any of the numbers coming out of China today and I think that their economy is slowing at a rapid pace. So we have to presume these reports are going to be awful," said Cramer.
Lot of big companies report on Tuesday. Morgan Stanley (NYSE:MS) has been falling lately and Cramer is concerned all the negatives are not baked in the stock yet. He will be watching their earnings closely. Bank of America (NYSE:BAC) will also report its earnings on the same day. Although the stock is cheap, Cramer does not expect the needle of the stock to move up since the market is bad.
Delta Air Lines (NYSE:DAL) reports on Tuesday and it is one of the highly anticipated earnings since the principal input cost for airlines has been down for a long time, but the stocks have not been performing. If the company delivers an upside surprise, then all will be well else the stock will be crushed if they talk about competition and pricing.
The best-performing stock of 2015 - Netflix (NASDAQ:NFLX) will report earnings which is not expected to be hot. Cramer thinks the stock is going to go down. United Health (NYSE:UNH) also reports Tuesday. IBM (NYSE:IBM) reports as well and based on prior quarter's performance, there could be more selling.
Goldman Sachs (NYSE:GS) will report earnings on Wednesday and Cramer thinks the stock's performance shows the negativity surrounding the financials.
Cramer is bearish on other companies that will report - Union Pacific (NYSE:UNP), American Express (NYSE:AXP) or Schlumberger (NYSE:SLB). Starbucks (NASDAQ:SBUX) also reports on Thursday and Cramer is eager to do some buying on weakness.
The industrial giant General Electric (NYSE:GE) will report on Friday and Cramer advised buying the stock if it falls below $23.
Will 2016 be the year of recession?
If the Fed continues to raise the interest rates in 2016 as planned, then this will be the year of the recession according to Cramer. It is important for Fed's chairman Janet Yellen to stop the Fed's governors who keep talking about the rate hike publicly.
While the market is concerned about China and the falling crude prices, most of the weakness is a direct result of the rate hikes. It's as if the investors are constantly fighting with the Fed.
Viewer calls taken by Cramer
Nucor (NYSE:NUE): The Chinese dumping will hurt the company.
MetLife (NYSE:MET): Cramer is happy with the company's spin-off.
AT&T (NYSE:T): AT&T is better on the dividend and Verizon is better on the fundamentals. Both are good stocks.
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