10 Reasons That the Stock Market Rally Is Real

As the stock market hits new highs, optimism appears to be returning to Wall Street. On yesterday’s Mad Money show, Jim Cramer laid out 10 reasons that the stock market rally is real.

1. Transports are strong – transports are an excellent indication of the markets direction since they show the movement of products and active commerce.

2. Rally in the banking index – since available credit is the lifeblood of business, strong financials generally points to a strong market.

3. Positive Reaction to Upgrades – in a bear market, no one cares about analyst upgrades. But yesterday Lincoln National (LNC: 24.39 0.00%) stock jumped on an analyst upgrade this week which is a bullish sign.

4. Tech Rally – the bellwether tech stocks are climbing higher. Apple (AAPL: 476.68 0.00%), Oracle (ORCL: 28.73 0.00%), Microsoft (MSFT: 30.66 0.00%) and Intel (INTC: 26.85 0.00%) have all posted solid gains in recent weeks, indicating that the long-term tech themes are gaining strength.

5. Cash Is Stashed on the Sidelines – over the last 3 years, a lot of investors got out of stocks completely. With cash on the sidelines, it is only a matter of time before they start pouring it once again into stocks.

6. Acquirers Rally – when the market is flat or down, acquiring companies that announce an acquisition generally see they shares fall. However, Massey Energy (MEE: 0.00 N/A) was up nearly 6% yesterday after it announced it is going to buy Cumberland Oil & Gas.

7. Positive Reaction to Secondary Offerings – often investors worry that secondary offerings are going to dilute share value. However, Hartford Financial (HIG: 20.58 0.00%) rallied 5% on the announcement of its secondary offering.

8. IPOs Rise in Price – in a bear market, few companies are willing to go the IPO route. Even when there is an initial public offering, it starts the day flat or declines. Financial Engines (FNGN: 24.30 0.00%) saw a big jump in its first day of trading.

9. The Market Has Good Breadth – the number of stocks posting gains are outnumbering the number of stocks on the decline. Before the market crashed, the opposite was true.

10. Pessimism is High – the fact that there are so many pessimists and cynics prevents the market from getting overhyped and is keeping prices in check.

Cramer said that he has been using these 10 factors for over 30 years to judge the health of the stock market and they are almost never wrong.