Inventory futures mislead buyers and create shopping for alternatives

On Jul 12, 2021

CNBC’s Jim Cramer turned stock futures into a worthless tool for measuring the temperature of the market after stock indices hit records on Monday.

“If you wake up at 4am you will learn a lot about the market. I encourage you to try it out if you want to see how stocks do,” Cramer said on Mad Money.

“One look at the Dow futures told you this was going to be a bad day, a down day, maybe a terrible day because the Dow futures lost 100 points.”

Shares started lower in the morning before rising to close the trading day on fresh highs. The Dow Jones Industrial Average rose 126 points and settled at just under 34,996.18 given investor optimism about the earnings season.

Cramer took the moment to break down how bullish traders can use the futures, which are derivatives used as an indicator of price movement to play the market. He revealed that he is judging the market on a longer-term outlook rather than daily fluctuations in trading prices.

“If you share my bullish worldview, then you can get up early, have a look [and] wait for the futures to knock your favorite stocks over, “Cramer said.

“The futures are absolutely worthless as a weather vane. You should just get them out of your mind unless you are looking for a buying opportunity when they foolishly tear things down, ”he added.

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Cramer said investors have a chance to buy stocks like Disney and American Express. Disney shares rose more than 4% during the session. American Express gained around 1%. However, those stocks fell more than 2 points in morning trading before bouncing more than 2% from their lows to a closing price of $ 173.60 per share.

Bank stocks like JPMorgan Chase and Goldman Sachs also fell in early trading before skyrocketing, Cramer said.

“The pattern has been with us for months now and every time it fools people. I urge you not to be misled by the downtrend in futures, ”he said. “If you have the guts of your bullish beliefs, these dips are a gift.”