These snapback rallies like yesterday are reminders of one of the toughest traits of this market: the stocks that were getting crushed, the ones that were just mother's milk for the shorts, are just the coiled springs for the longs come Monday.
I've been watching the big-cap rollover with acute pain. 3M (MMM), United Technologies (UTX), Cummins (CMI), Honeywell (HON) and Eaton (ETN) have been very difficult stocks, all trading down with China. But we get a futures-led rally and they go higher, even though nothing new has happened in China.
That's because they have become the stocks to buy puts on when you think China's rolling over, but they trade wildly with the S&P during any S&P buy program like we had almost all day Monday.
Plus, it isn't like you get a chance to cover. These stocks all opened up a great deal and stayed up a great deal. There was barely a minute that you have a chance to cover.
In fact, only if a stock was down on a research call, like National Oilwell Varco (NOV), did you get a chance to cover. The next best hope was an intraday reversal from a stock that the market's turned on, like Celgene (CELG).
Otherwise, your goose was cooked on most shorts.
That's the asymmetrical way the market trades. Individual stocks go down for specific reasons, but can easily rally for no reason other than the S&P as everyone knows that the biggest winners Monday had no real news flow.
I know this will sound strange, but we old-timers remember when things pretty much started at square one each day and you didn't get a gap open and you could buy stocks based on their fundamentals and not the ETF or SPX fundamentals. You still can, but usually not the day of impacts.
Now typically, when I write something like this, the skeptics will say "Cramer just wants it to go higher 'cause he's just a bull." That's the uninformed, stupid thing to say. But I always defend the right of people to be incredibly stupid because then we can all make money off them. The truth is, I want stocks to trade as close to lockstep to the companies themselves as they can.
When that happens, you can make money coldly and rationally. But this "take up all the usual suspects that are in the S&P" stuff just makes a mockery of the job of picking stocks.
Glad it doesn't happen that much anymore. But when it does, it makes the whole exercise of homework a colossal waste of time until the programs are over.