Saturday, June 3, 2023

Stock futures mislead investors, create buying opportunities


CNBC’s Jim Cramer rendered stock futures to be a worthless tool to gauge the temperature of the market after stock indexes finished at records on Monday.

“When you wake up at 4 a.m., you’ll learn a ton amount the market. I encourage you to try it if you want to see how stocks are setting up,” Cramer said on “Mad Money.”

“One look at the Dow futures told you that this would be a bad day, a down day, maybe a terrible day because the Dow futures were down 100 points.”

Stocks started lower in the morning before climbing to close the trading day at fresh highs. The Dow Jones Industrial Average advanced 126 points to settle just under 34,996.18 amid investor optimism about earnings season.

Cramer used the moment to break down how bullish traders can use the futures, which are derivative contracts used as an indicator of price movements, to game the market. He revealed that he judges the market based on a longer-term outlook, rather than the daily gyrations in trading prices.

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

“The futures are absolutely worthless as a weathervane. You should just banish them from all thought, unless you’re looking for a buying opportunity when they foolishly knock things down,” he added.

Cramer said investors had a chance to move on stocks like Disney and American Express. Shares of Disney rallied more than 4% during the session. American Express gained about 1%. Those shares, however, fell more than 2 points in morning trading before bouncing more than 2% from their lows to a close of $173.60 per share.

Bank stocks like JPMorgan Chase and Goldman Sachs also dipped in early trading before shooting higher, Cramer pointed out.

“The pattern’s been with us for months now and each time it fools people. I am urging you not to be misled by the downward pull of the futures,” he said. “If you have the courage of your bullish convictions, these dips are a gift.”

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