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CNBC’s Jim Cramer made stock futures a worthless tool for gauging market temperature after stock indexes hit record highs on Monday.
“When you wake up at 4 am you will learn a lot about the market. I encourage you to give it a try if you want to see how the stocks go,” Cramer said on “Mad Money”.
“A look at the Dow Futures told you it would be a bad day, a down day, maybe a terrible day because the Dow futures were down 100 points.”
Stocks started to fall in the morning before climbing to close the trading day at new highs. The Dow Jones Industrial Average rose 126 points to just under 34,996.18 amid investor optimism about the earnings season.
Cramer used this moment to explain how bullish traders can use futures, which are derivative contracts used as an indicator of price movements, to play in the market. He revealed that he is judging the market based on a longer-term perspective, rather than daily fluctuations in trading prices.
“If you share my bullish worldview then you can get up early take a look [and] wait for the futures to bring down your favorite stocks, ”Cramer said.
“Futures are worth absolutely nothing as a weather vane. You should just banish them from all thought, unless you are looking for a buying opportunity when they stupidly turn things around,” he added.
Cramer said investors have a chance to move on stocks like Disney and American Express. Disney shares rose more than 4% during the session. American Express gained about 1%. These stocks, however, lost more than 2 points in morning trading before rebounding more than 2% from their lows to a close of $ 173.60 per share.
Bank stocks like JPMorgan Chase and Goldman Sachs also fell early in the session before climbing, Cramer said.
“The model has been with us for months now and every time he deceives people. I urge you not to be misled by the downward pull of futures,” he said. “If you have the courage of your bullish convictions, these lows are a gift.”
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