Cramer: Don't Be Too Sanguine This Week

 | Mar 13, 2017 | 5:09 AM EDT
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Stock quotes in this article:

tol

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len

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dhi

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kbh

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phm

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aet

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hum

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unh

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khc

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ul

Something's got to give this week. That's my impression, after going through hundreds of charts this weekend. There are too many contradictions going on, too many outright zero-sum games being portrayed as win-wins, too many historically weak situations that show strong stock setups.

Let me go over the most glaring contradictions, so you know where I am coming from.

First, let's take the homebuilders. The stocks of Toll (TOL) , Lennar (LEN) , Horton (DHI) , KB Home (KBH) and Pulte (PHM) have been among the strongest in the entire market. Now, you could argue that the spring selling season could be a good one and the commentary around orders has been very positive. Toll, in particular, has cited demand that's unusually robust for this time of year. KB Home is riding a wave of negativity to huge gains. It's been hated the whole way, but it has remarkable California holdings.

So what's wrong? We are going to get a rate hike this week and the possibility of commentary that drops the word "gradual" from its statement about future hikes and, instead, substitutes something like "resume a traditional rise to non-emergency rates."

As much as I like these stocks, I find it awfully hard to imagine how they can hold up under that kind of Fed language. I think something's got to give.

Repeal and replace is such a tired phrase, but there are Republicans in the House who have been fighting this battle ever since Obamacare was approved and they are rabid in insistence that nothing else happens until this issue is resolved. That said, the issue encompasses so many interests that it is difficult to figure out who the winners and losers will be.

For example, if benefits are cut back, the hospitals, which have been big winners, will turn into losers with lots of bad debts. The drug companies have been big gainers from the Affordable Care Act. However, the rhetoric from the White House would indicate that they have to become losers as part of any solution. The huge health insurers, like Aetna (AET) , Humana (HUM) and UnitedHealth (UNH) , have been struggling under the ACA. United Health has dropped out of the program because of the costs.

Now, if the program is dismantled entirely, are these companies going to be the beneficiaries of the changes? If they are, I have news for the stock holders: you have already won. All the stocks act as if they are going to get huge windfalls as the exchanges are somehow more competitive. I do not understand how, if the exchanges are going to be more competitive, these companies are winners. I do know they have fabulous lobbyists.

All I can say is that every one of these stocks is saying that everybody's a winner in repeal and replace. How in heck can that be realistic?

We don't know whether the oil stocks are leading the futures or not, but something's got to give here, too. The stocks are suggesting that oil is going to break to the low forties. But with the huge Saudi Aramco deal on the horizon, is this the time for the Saudis to let OPEC discipline go by the wayside? Can the inventories go still higher from these levels, and are the speculators still riding things down?

Unless oil breaks down severely from here, it's difficult to fathom that the stocks take another hit.

You have to puzzle over what happens to the consumer packaged goods stocks. They had been going down in anticipation of a rate hike, because their dividends aren't enough of a protection in a multiple rate hike economy. But then Kraft-Heinz (KHC) went after Unilever (UL) and the deal failed to be consummated. Since then, we have learned that Warren Buffett, a key investor, won't let Kraft Heinz go hostile. But as I scrutinize this group, I come back and say: are you kidding me? None of them is for sale. Push is about to come to shove.

All of these contradictions should literally play out this week and my take is don't get too sanguine. The charts indicate too many winners vs. the possibilities that could play out. Just be ready for some reality to sink into the stock universe, the reality of the business world and the world of Washington, which produces a lot more losers than the upward trajectory of these stocks would indicate.

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