Cramer: Dominoes Are in Play Today

 | Sep 20, 2017 | 3:08 PM EDT
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How many games of dominoes can you play at once? If you are the stock market you can play three of them at once, and even if they aren't accurate, of even commonsensical they make a tremendous difference in a day's trading.

What are today's dominoes? We got three of them, Apple (AAPL) , specifically issues with the Apple watch, General Mills (GIS) in what I regard as a flabbergasting disappointment of an earnings report, and still one more miserable quarter from the retail chain Bed Bath & Beyond (BBBY) .

Let's start with the most visible, the decline in Apple's stock. What was the proximate cause? The best I can tell is that it was a glitch Apple revealed that made the new model watch have what I think will be a barely noticeable problem making and taking calls in some isolated instances. I say barely noticeable not because I have the watch -- although if Lisa, my wife, is reading this, I could use the new one, glitch or not-but because the vast majority of the press critics never even stumbled on it. The watch works fine at your home, your work, or out on the street, pretty much wherever your cellphone works.

Nonetheless, because you know I say own the stock of Apple don't trade it, let me spell out the glitch. If you use the watch at a place where you may have an open WiFi account, such as a hotel or, more likely, say, a Starbucks (SBUX) , the phone has trouble finding you. Apple's working on a patch to fix it. Nonetheless, we all hold Apple to such high standards as the world's greatest consumer product company, it's something that causes a pause in sales. Now, the watch isn't the phone, it's a much more minor line item for the world's largest company which sees more than $200 billion in sales a year. In fact, I doubt you will even notice it when the company reports. I feel as strongly as I did back in July of 2010 when I came on television and urged people to buy the stock of Apple after it had a five point hit on a glitch with the iPhone 4's antenna. You can't see the $37 to $32 point dip that the stock had when I pounded the table to own not trade the stock. You can't see it because the stock's now at $155. Suffice it to say though that after a big run people want to take profits in any stock and I guess this is as good -- or bad -- a reason as any.

Now let's go back to those dopey dominoes. Apple's got a ton of suppliers and if Apple's stock catches a cold, these companies get pneumonia. So the stocks of Skyworks Solutions (SWKS) , Qorvo (QRVO) , Cirrus Logic (CRUS) , Texas Instruments (TXN) , Broadcom (BRCM) and Nvidia (NVDA) -- the sainted Nvidia -- fall down. Again, does this make sense? No, especially because a lot of these companies have no real or meaningful exposure to the watch. For example, should the stock of Broadcom, which makes so many parts for Apple and Samsung as well as anyone else in telecommunications get pulverized as it did today?

I think it's a little overdone, but the tech stock's been trading not like a good semi, but a jackknifed one. So everyone bolts. Will they be part of the glitch? Or the fix? Who knows? As I always say, Apple's like the Fight Club, and the first rule of the Fight Club is you don't talk about the Fight Club.

My take? If you don't own any of these stocks then you can start picking. You may not get an instant rally but you are getting a needed price break to pounce.

Now, some of you might say, hey, it's not just the Apple issue. You've got a disappointing Adobe (ADBE) report, too. I say, give me a break. The company blew away the numbers on top and bottom and gave you a terrific forecast with one portion of its business outlook a little cloudy because it's taken longer to close some deals. Adobe's so up front and honest that I don't even think they had to talk about the issue and the vast majority of Wall Street analysts raised their price target. Nevertheless the stock's up 45% for the year. You've got another reasonable reason to take profits. I would be looking to get in, not out of the stock.

Next domino? The abysmal figures out of General Mills this morning. Not only did the food company tell you that cereal sales declined 7 percent and U.S. yogurt sales fell double digits, it gave you an overall 9% earnings decline, something that was sure out of synch with the positive story they told at a conference less than TWO WEEKS AGO. I think they bagged you.

So what falls? The pantry stocks: Kellogg's (K) , Kraft Heinz (KHC) , Campbell's (CPB) , Conagra (CAG) , JM Smucker (SJM) , Hershey's (HSY) , you know, the usual suspects.

Unlike, tech though, I have no desire to defend these companies' stocks. They are all stocks. They are all struggling with headwinds as squeezes by customers like Whole Foods owner, Amazon (AMZN) , Walmart (WMT) and Kroger (KR) . They aren't exactly loved by millennials. And in many cases their raw costs are going up,

These are dominoes I trust.

Finally there's retail. Last night Bed Bath & Beyond reported a number that was beyond the pale, a nightmare that showed it still hasn't figured out how to compete with Amazon. I feel badly for them as I wouldn't know what they should be doing either. But then again I am not running the company.

Nonetheless we got dominoes flying here, too, with Macy's (M) , Kohl's (KSS) , Target (TGT) , and Costco (COST) getting hit. Oh, and you want domino fall by association?

The cascade reached CVS (CVS) and Walgreen's (WAG) , the two major drug store chains, although to be fair, they are down more than other retailers because of rumors that Amazon's talking about buying a pharmacy benefit manager and cutting out a major source of profits for the drug store chains. There was a time when I wouldn't let a rumor like this shake me out of an investment. But we have seen what happens when Amazon comes into an industry or we hear it even being talked about. Wholesale destruction. The stocks of companies like Home Depot (HD) and Lowe's (LOW) got obliterated when Amazon tied up with Sears (SHLD) for Kenmore appliances.

It was hard to look at the stocks of the do-it-yourself auto parts companies like Autozone (AZO) , Oreilly Automotive (ORLY) and Advance Auto Parts (AAP) when Amazon dipped its toe in that area.

So who wants to take a chance.

Now sometimes the whole chain of dominoes gets a push from more than just the industry fundamentals. The Fed announced it's leaving rates unchanged, but talked about raising rates and selling bonds. The whole thing was exactly as expected. Oh sure, some thought the statement was too hawkish. Others thought too soft. No matter. Those who thought it was too hot or too cold came in and helped run down the chain after the fed's statement.

To me a diversified portfolio that included some banks, which do well if the Fed raises rates, and some oils, which have gone from negative to positive as oil tries to stay above $50, besides just tech, retail or foods, helped mitigate the damage.

So, to recap, when this market gets some bad news after its remarkable run you have to break out the dominoes to explain the decline. I wish I could tell you the game is now done and the damage contained. We usually, though, get more than one down day. I say if you own no tech, take a stab at your faves but take a pass on the foods or the retailers: the domino declines just make too much sense to me.

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