On paper the stock market should be great, not on a knife’s edge. But that’s the opportunity

When I look at Thursday’s rally, I am beginning to realize that we have become so binary and so up close that we have lost our ability to think about what matters. The big fish data got caught among the minnow minutiae and we ended up with ridiculous rallies that are, therefore, based on nothing. That, of course, tells you that those newfound percentages can be taken away based on nothing. That’s how trapped and intellectually devoid we have become. I have now studied every aspect of the runup of that beautiful — for the bulls — session on Thursday, and I can truly say that it was game-set-match in favor of the bulls by 8:30 a.m. ET — one hour before regular stock trading begins. That’s when the weekly jobless claims number was released. The components of that print — somehow — made sidelined investors feel more comfortable that the Federal Reserve will cut interest rates without the economy rolling over, so it’s all clear to buy. They tackled the opening at 9:30 a.m. ET hard, with the industrials and techs getting the benefit of the doubt. Was it an S & P futures-based program that resurrected stocks, both in the morning and at the close? It got hard to tell. It was that positive a session. How could a number that comes out every Thursday really play the catalyst? The absurdity of it is palpable. I mean you could hire 10,000 actors and then lay them off and you might have had a selloff of gigantic proportions because the hard-landing types would be unfettered. Then again, is that any more outrageous behavior than watching unknown large institutions sell their large-cap U.S. stocks on Monday because Japan’s central bank raised rates there, causing an over 12% decline in Japanese stocks in one session? The lunacy of that move and its aftershocks brought Wall Street’s fear gauge, the VIX , to a 52-week high of 65.73 intraday, another insane collaterally thoughtless metric that alternately scared some and made others feel the whole thing is overdone. At the same time, the S & P 500 held at certain levels that helped start the fire. For comparison, the VIX was at a 52-week low of 10.62 on July 19. The whole thing was chimerical. Let’s step back for a moment and remember where we are: We’ve been in a precarious earnings season and the havoc dealt to whole sectors screams to be noticed. Whole swaths of positive points were rolled back because of the Japanese-related craziness. For example, this season started with the banks roaring higher on great numbers, legitimately great numbers led by a phenomenal Bank of America quarter. Then less than a month later, we get the unleashed tsunami of selling that seemed particularly harsh on the financials. On top of that came the report of huge selling of Bank of America stock by Warren Buffett as if, somehow, that meant he no longer liked the banks as a group. Nobody questioned whether Buffett was just selling everything not nailed down, including Club holding Apple . Or maybe there’s been some passing of the baton and the new manager wants a clean slate. Somehow, though, Buffett doomed the financials in part because he was caught selling the best one. Looking back, of course, the journalistic imperative is to find a reason for that Japanese yen carry trade hangover to legitimize the selling. We can’t just say that a bunch of overleveraged cowboys who thought they were immune from mistakes blew out their winning banking positions turning them into losses. Then some old Buffett sell program for who knows what reason came on top of it. We can’t say that because it makes us sound stupid. So, we decide that the banks stocks are going down because they historically do badly when the Fed starts cutting rates. We let the story get in the way of the facts. Rate cuts are very bullish for banks. The possibility of credit losses will be stayed. The net interest income (NII) holy grail may give way to loan growth and, in some cases, better expense numbers because off artificial intelligence. We are now well on our way to improving urban areas as recognized by the strength of commercial developers SL Green and Boston Properties. The office building cataclysm seems now behind us. As the yen carry trade was being unwound, we had a whole series of tech companies report earnings. Even as we had a cellphone resurgence, even as we have a personal computer refresh — otherwise hallmark events — all that mattered was excess data center spend and the rumor that Nvidia ‘s Blackwell chip platform was being delayed indefinitely. Nvidia is, and has always been, an honest company. The rumor couldn’t be squelched because Nvidia is in a quiet period ahead of earnings out on Aug. 28. The stock took a beating. Enter 0DTE options — or zero days to expirations options. We’re talking about those DraftKings-like instruments that only served to verify the distinctly negative action. I found it hard to believe that we saw obits of Nvidia all week, including stories that said the eyepopping gains made no sense after all. Did anyone stop to think that it is still the number one performer in the S & P 500, having dethroned Super Micro Computer ? Did anyone bother to read or hear what dethroned Super Micro; the fact that it was overwhelmed with orders and couldn’t fulfill them? Did anyone bother to check that Club name Meta Platforms apparently placed an order so large that Super Micro misjudged or perhaps overpromised? Was anyone factoring in that one of the great data center companies, Arista Networks , reported a phenomenal set of numbers, signifying that all is well with the buildout? No. The market gods simply pronounced the data story dead, which then reverberated as far as Club industrials Eaton and the even more tangential Dover , was a real decimation that washed over anything good in the semi world. It also took with it a couple of fallen stars, Micron, Dell , Hewlett Packard Enterprise , and Club name Advanced Micro Devices . The later just made no sense because it is pulling away from Intel on the low end and if Nvidia really does have production problems then AMD is the de facto winner. Again, Nvidia gets the blame. In fact, the only stock that didn’t suffer from an Nvidia relation, Apple, got through earnings without too much trouble. But it then got eviscerated by Buffett, by the way, said he didn’t want to sell Apple when apparently he was selling it at roughly the same time. Maybe that was what shocked people into dumping the stock. It’s pretty ironic but the Magnificent Six stocks — we own them all — got pressured by all of this even as the market judged all of the quarters of decent quality except Amazon , which was considered to be an out and out disaster. That made it my favorite one because the story was complicated by minute-to-minute declines in ordering things during major news events including the attempted assassination Donald Trump and the Olympics. Until this quarter, no one thought much of any distraction and weaker sales. We didn’t realize how little was made on smaller same-day packages. We totally ignored the unbelievable Amazon Web Services cloud performance, something that was so strong, with giant gross margins, that should have counteracted Amazon Prime weakness on the retail side. I liked the quarter. For those by-and-large excellent quarters we ended up have declines of monumental proportions that almost seem like they are preordained and the beginning of a new bear market. Not only that, we’ve turned on AI with a vengeance. It now feels like nothing can be gained from it. Some of that thesis is bogus. We just don’t really find out how AI is working because many AI customers don’t want to dissemble about what’s really happening behind the scenes: consultants like Accenture , Deloitte, McKinsey, and E & Y advising execs to hold off on hiring because workers seem to be twice as productive with their AI tools. So, why not get rid of half the people in your organization? Do you really need that many? Who knows? When I meet with executives who are using AI, they are telling me that they aren’t sure how many people they need — except it’s less than before? No one want to talk about it like that. There is heightened sensitivity to firing people right now, more than expected. So, the pro-AI story line goes unwanted save ServiceNow and maybe the now-disappointing Club name, Salesforce . I can’t believe how few executives realize that if they don’t start saying how they use AI we are going to start penalizing them, too. I’ve been saying those two companies have regarded AI as a mainstay of their business. I was hoping to find others. I didn’t. Where does this leave us? I think in a place where we are moderately oversold where many just expect a decline or a retest starting this week. I know we are looking for one and want to put the money we took out of the market to build up newer positions that are too small to matter. It’s a topic I will talk about at this week’s Monthly Meeting livestream for Club members. Lost in the shuffle — other than Apple, which historically traded with a lower multiple — things are cheap. Even Apple, if you regard the service stream as newly paramount, can’t be regarded as overwhelmingly expensive. We are getting a chance for the industrials and the aerospace and defense stocks to shine. Everything else seems to be running in place even as we are headed into Fed rate cut world. To recap, despite good fundamentals, despite Fed rate cut(s) coming, despite an increasing likelihood of a soft economic landing, despite the fact that a wall of money might come in from the sidelines because of lower rates, we really do trade miserably. That’s unless we get a positive data point of the day as we did last Thursday. It causes us to wonder what we are missing. Is it Vice President Kamala Harris ‘ seeming wish if she were to become president to raise corporate taxes from favorable moment to one that creates the need for immediate estimate cuts? Is it the prospect of a mercurial Trump if he were to regain the White House who threatens cherished Federal Reserve independence? Right now, we don’t know and that makes things all the more fragile, especially because well-known market bears have been trotted out and put on TV regaling us with their prowess even as they have made no money in ages. At least they are not Cathie Wood where you get to see how truly bad she is in terms of picking stocks. Her endless buys at one foolish level are only matched by her endless sells well below that level. We’re not sanguine even as I sense we should be, given how tame rates have gotten and how good earnings are. Sure, we are about to get a raft of earnings but only retail seems problematic. No matter, I think there will be buyers galore of Home Depot and Lowe’s on some sort of last-bad-quarter thesis. That’s one of reasons I am expecting some positive action from our housing related stories. It’s what the textbooks tell you to buy at this juncture. Ultimately, though, it’s my faith in the data center — buttressed by a belief that Nvidia’s roadmap can change things for the stocks of so many companies, including the ones trashed in the last three week — as well as my belief that a beckoning rate cut cycle is inherently good news for the market. It should be a good moment, but it isn’t. Hmm? Therein lies the opportunity. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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