Cramer Tries To Make Sense Of Monday's Market Rally

Major U.S. equity indices finished Monday's trading session notably higher — a complete reversal from Friday's "dismal and dejected" trading session, CNBC's Jim Cramer said during his daily "Mad Money" show.

What Happened

The Dow Jones Industrial Average gained more than 650 points Monday, or nearly 3 percent, for four key reasons, Cramer said. Heading into the weekend, investors had legitimate reason to be concerned that China's government wouldn't back away from a trade war with the United States. But over the weekend, "good cop" Treasury Secretary Steve Mnuchin said during a TV interview the two governments are making progress in trade talks that include the potential for lower tariffs on U.S. exports into China.

Adult film star Stormy Daniels' appearance on "60 Minutes" didn't create nearly the amount of chaos it could have, Cramer said. She discussed an alleged affair with President Donald Trump in what can now be described as "just a really embarrassing story," he said. 

"The bears needed a [sex] tape," Cramer said. "They didn't get one."

Fundamentally speaking, the markets were poised for a rebound and were aided by shorts covering their positions. The markets were oversold after Friday's trading session to the point of being like a "coiled sprint, ready to jump higher." 

Finally, Facebook, Inc. Common Stock FB's stock started to show signs of stabilizing on Monday, Cramer said. Advertisers "still love" the platform, and the stock's valuation at Monday morning's levels implies the social media company will see almost zero growth, he said. 

Why It's Important

Monday's rally was important for investors because it serves as a good test to evaluate a portfolio of stocks.

"If you own a stock that didn't go up today, you've got a real problem on your hands," Cramer said. "If your stocks did go up, maybe let them run a bit, but don't get greedy."

What's Next

The Dow was up slightly at 24,213.20 at the time of publication Tuesday morning, while the Nasdaq was down slightly at 7,219.09 and the S&P 500 was down slightly at 2,658.04. 

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