Cramer Cautions Against Buying After Monday's Rally

Major U.S. stock indices surged Monday amid multiple encouraging coronavirus developments, including a potential peak in New York City's new cases and signs that Italy is "clearly over the hump," CNBC's Jim Cramer said Monday. 

Does this mean the bull market is back? Not so fast, the "Mad Money" host said. 

Cramer Says Market Action 'Kind Of Ridiculous' 

The Dow Jones, S&P 500 and Nasdaq indices each gained more than 7%, but one has to question if the one-day surge represents "too much optimism," Cramer said.

The irrationality of the gains is simple: should investors buy stocks if the hospitalization trends improve and sell when there is a shortage of personal protective equipment?

"No, it's kind of ridiculous," he said. 

As a general rule, a stock market driven by index buying or index selling, as was the case Monday, is unsustainable and fakes people out, he said.

Cramer Sees Big Downside Potential 

The "big buying" opportunity for stocks took place last week, as many individual stocks likely bottomed, Cramer said.

Investors who pile in on top of the current "mini-bull market" could be susceptible to a poor economic readout, he said, adding that the downside potential for stocks at current levels could prove to be "significant."

A Wait-And-See Approach

Improving coronavirus trends and revised death simulations, coupled with a business community eager to borrow money to re-open stores, doesn't translate to improved earnings per share, Cramer said.

Investors who are concerned with upcoming EPS expectations should wait for the "market to cool off" after a day like Monday, he said. 

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