The Yellow Brick Road

Jim Cramer is the wisdom of CNBC, I love to citate him again and again.

First link:

Pushing toy stuffed bears through a meat slicer, the screaming, peripatetic CNBC anchor Jim Cramer declared that he “had unbelievable guts to call a bottom,” and said:

“I am indeed sticking my neck out right here, right now, declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15. and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they're] missing a great deal of upside.

Stop waiting, [and] buy the next dip because I think it might be the last big one.”

Second link:

Jim Cramer told viewers of CNBC’s “Mad Money” TV show Thursday that the markets will not trade below the lows from July 15. He gave out the following six reasons for the market to hold those lows.

1. A bottom is forming in the housing stocks, signaling a bottom in the housing market that he thinks could happen in 300 days.
2. The Federal Deposit Insurance Corporation has announced a plan to fix ailing banks, allowing stronger entities to buy good assets while the government assumes the bad loans.
3. Both presidential candidates are likely to lower individual tax rates, which will help spur consumer spending.
4. Commodity prices have crashed across the board, helping to lower the raw costs for every company that uses commodities.
5. The price of gasoline is coming down even lower than Cramer first thought.
6. The stock of Wal-mart (WMT), which is where millions of people shop, is showing some strength.

The chart:

(Click to enlarge)

Please feel free to pass this chart around to promote the fine work of Mr. Cramer.

Edit: let me add a small detail here. If you have just the basic knowledge of Elliotte Wave theory you can agree that:

• The decline from October 2007 to March 2008 is a clear 5.
• Then the correction from March to May 2008 is a messy zig-zag, i.e. a clear correctional pull-back.
• Then the decline from May to July is a thin channel with many non-overlapping waves, i.e. it clearly looks like an extended wave (traditionally you should count by extending the 3). The fact that it has such small waves indicate that it is just the minor wave of a bigger impulse down
• The wave from July to September, again, looks like a correctional zig-zag

So it is absolutely obvious that it was impossible to call July a bottom just from the trivial textbook theory.

The most bullish count would produce a bottom somewhere in the 1,100-1,150 area for S&P, but that is clearly well below July. So what this guy was thinking?

Even though I don’t think Cramer is smart, or at least I never heard anything particularly smart from him – he is definitely not stupid and being in the industry for 30+ years he must know Elliott waves. It just takes one weekend to learn. So calling the bottom in July means that he doesn’t know even the trivial textbook facts of the technical analysis. Or he made a wrong call on purpose. And that smells very, very bad…