• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Jim Cramer

Jim Cramer: Pajama Traders Got It Wrong -- Again

The important thing on the China trade talks is that the president can move the market and he doesn't want it to go down too much.
By JIM CRAMER Aug 26, 2019 | 07:17 AM EDT

Let's think about what happened to the S&P 500 futures last night and this morning. Let's think about how wrong traders were who sold the futures down 300 and how right it was to take the other side of the trade. Why did it make sense to take the other side of the trade, rather than join them in their panic -- contrived or otherwise? Why should you risk buying what they were selling?

Simple. I have been around long enough to recognize that when you think everything is "all over" and the bull, wherever it is, might be "finished," it is important to think "what could go right, here, what could catch the pajama gang off guard? And not just because they are so often wrong, but because markets can and do surprise these fools all of the time."

I want to parse their thinking and then show you how wrong they can be. First, the future sellers are basing their moves not on new news, but on a belief that real owners and traders will panic and sell again this Monday morning on what they knew on Friday.

Remember, this weekend all we heard was that the president had second thoughts on the tariffs, making you think he wished he hadn't tweeted the harsh comments about companies needing to leave China and that he shouldn't have decided to raise both the current tariffs from 25% to 30% and the tariffs set for September 1 from 10 to 15%.

But then he had his people come out and say he meant that he should have raised the tariffs even higher. Total confusion reigns. Still nothing new.

Presumably the pajama traders took that alleged reversal to mean that things with China are even worse than we thought, if that's even possible. Therefore the sellers on Friday would return and they wanted to get ahead of them.

But then, in the wee hours of the morning, we got the news from the president that the Chinese want to come "back to the table."

That meant every single seller last night was on the wrong side, that my thinking about "what could go right" is the lesson that happens often enough that you must accept it as a possibility especially with this president. The futures spiked and were up 300, a swing of 600 and a total wipe out of last night's futures sellers.

We know that no sooner than the president said he got two different calls and that things are better than ever, the best even, the rearguard journalists came out and said that it was pretty much of a joke and that there was no call or they were low level.

But then the president reiterated that the Chinese want to come back to the table just at the moment when the Chinese again would not confirm the call. That drove the futures lower, cutting the gain in half.

All of this is a demonstration of how you can't bank on anything so why bother trying?

We know the president reads the market. We know that the leaders in the G-7 understand that China has become the number one trading partner for two-thirds of the world, so the president is under pressure from these leaders to make a deal.

So, why not say that things are going well? The president got the calls that the market was going to get clubbed again and he didn't want it to happen. Why not refute his own view?

Now let's go one step further. The cynics who said that Trump made it all up don't get it. The fact is that the president can move the market and he doesn't want it down too much.

So why not conclude that he will do something that makes selling wrong? That's the real point. If you put on your pjs and start selling Sunday night based on a belief that there will be even more selling down 300, I am saying you are most likely going to be wrong.

And whether the president got Chinese calls or not, they lost. That's really all that matters. Don't put the pajamas on. Don't make the nighttime trades down -- or up -- a huge amount, for that matter. Wait. The buyers may know more than you. They know that things are way too unpredictable to bet that there will be more selling than down 300. They were right. That's really all that matters.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Futures | Investing | Markets | Politics | Stocks | Trading | Jim Cramer | U.S. Equity | Global Equity |

More from Jim Cramer

Jim Cramer: I'll Put My Money With 'Boring but Lucrative' Any Day

Jim Cramer
Sep 29, 2021 1:28 PM EDT

Let's look at that recent downgrade of 'dull' Morgan Stanley and see why exciting is best left for the stadiums and amusement parks -- and not stocks.

Jim Cramer: America's Toughest Job? Finding Workers

Jim Cramer
Sep 28, 2021 12:17 PM EDT

It's the question of our time: Where are the people willing to take on these better paying gigs? Let's see what's going on and what we need to happen.

Jim Cramer: Here's How Analysts Can Be Off By a Wide Margin

Jim Cramer
Sep 24, 2021 12:02 PM EDT

Let's look at the reactions to Nike, Costco and Salesforce to see what happens when they're viewed from a real world perspective.

Jim Cramer: It's Pure Insanity That We Don't Make Chips Here in the U.S.

Jim Cramer
Sep 23, 2021 11:05 AM EDT

While the big guns meet at the White House about the global chip shortage, the president and these companies are approaching this all wrong.

Jim Cramer: Go Ahead, Have a Cow, but I Say Powell and Xi Are Bulls

Jim Cramer
Sep 22, 2021 3:51 PM EDT

We rallied, because China's President Xi and Fed Chair Powell made decisions that they knew would lead to rallies.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:58 PM EST REAL MONEY

    Sarge Guilfoyle Breaks Down the Jobs Report, Fed Policy and Stocks!

    Watch it here!
  • 11:35 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Trading an Irrational Market
  • 02:10 PM EST REAL MONEY

    Fed Rate Decision

    Fed Lifts Benchmark Rate by 25 Basis Points, Sees ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login