Why the Market Rallied—And Will Continue To

Published: Tuesday, 23 Mar 2010 | 6:06 PM ET
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The closing bell rang on another strong day for the markets, Cramer said, thanks largely to short sellers. Billion-dollar hedge funds have been caught on the wrong side of their trades, and now they’re racing to cover their bets. That’s how the Dow was able to add another 103 points on Tuesday to the incredible run it’s already had.

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These short sellers were banking on a “parade of horribles,” as Cramer called them, to generate their profits. Everything from a US commercial real estate collapse to a bursting asset bubble in China was supposed to weigh on stocks. And that’s to say nothing of the expected fall in American residential home prices, a negative Q1 for tech, banks buckling under the weight of reform and the fallout from health care, all of which were supposed to kill the market, too.

But none of that happened.

Instead, real estate investment trust stocks have ramped as REITS buy new properties on the cheap. Housing prices have stabilized – especially in California, which accounts for 20% of the US market. China continues to chew up commodities at an alarming rate (Cramer likes Walter Energy [WLT  Loading...      ()   ] as a play on it). And Intel [INTC  Loading...      ()   ], Microsoft [MSFT  Loading...      ()   ] and Oracle [ORCL  Loading...      ()   ] are signaling that in fact first-quarter growth accelerated.

Meanwhile, the worst of health-care reform, i.e., the taxes, won’t hit until 2011, the consumer is spending, and banking reform has been all but defanged by lobbyists. Best of all, though, Washington looks so tied up with that financial reform that it might disappear from the headlines for while. That leaves room for what Cramer thinks will be a “spectacular” earnings season to get some much-deserved attention.

In the end, Cramer said, “The bears deluded themselves.” They thought the world was coming to an end, but it arguably could be said that stocks are just coming to life. The parade of horribles is now a “parade of positives.” And it all happened even though employment hasn’t yet picked up.

“Can you imagine what happens if it does?” Cramer asked. “Can you imagine the bears turning into bulls as their last remaining hope goes away?”.

Note: i do not like Cramer， but I believe what he says in this article.