Weakerthanexpected manufacturing data and the brutal 3. 6 decline in the chinese stock market last night. How can this clearly bad Economic News produce such a remarkable run . Dow climbing 229 points, s p jumping, nasdaq gaining 1. 14 . Is this opposite day . Perhaps the market lost its mind . No, its like weve entered bizarreo world with bad news is good news. Why . The uglier the backdrop, the more likely the Federal Reserve stands pat and refuses to raise rates when it concludes its deliberation this is thursday. This fed meeting, like it or not and you know i dont like it is the most important event of 2015 for two reasons i dont recall a more opaque fed. Its driving me crazy its about to render a momentous decision that will surprise people. Second, the consequences of a rate hike, listen, youre not going to get that plus and minus stuff for america its plain negative for stocks but the upside from the no hike while positive as we saw in todays action perhaps stolen by from a benign announcement thursday is not positive enough to outweighing the potential down side from fed tightening. As i keep saying, i dont like risk reward here. I dont like it because negative Economic News might keep the fed on hold but it will cause earnings estimates which are the mothers milk of stock prices, to get slashed. Better Economic News causes the fed to raise rates which is even worse for the average. You know what . To me it almost feels like a loselose possibility for most stocks, creating a treacherous market. And i have to tell you, sometimes thats all too easily forgotten on bullish days like today. So going to this meeting i think its imperative to give you a feed cheat sheet on what can happen to your stocks depending on the feds decision. First the upside, if the fed says were on hold until we get more clarity about global weakness, especially in china and the emerging markets, then i think we rally dramatically simply out of muchneeded relief from the uncertainty, a decision not to raise rates with a statement saying we can hold off on night ng for the rest of the year will give us more more days like this one. Its a genuine bear buster. No rate hike with a statement of waitandsee will give us a few more days like this one, but the earnings estimates are very much at risk if the worlds economies dont improve. Okay, how about the down side that comes from a rate increase . I see six possible negatives for the stock market that you need to be ready for if the fed takes action and leaves the door open for even more increases in short order. [ boos ] first, higher Interest Rates per se weaken housing and auto sales. Some say housing has begun to cool. I think auto sales could be at a peak here and they can only get worse, not better. A rate hike causes earnings to come down for these two industries not to mention the ancillary companies that service them, and theyre big. Second, if the fed tighten, the dollar should reverse its recent weaker trend versus the euro which i like and move up sharply which i dont like because that causes earnings estimates for all u. S. Based International Stocks to be cut and cut immediately. Were at a crucial moment in the earnings calendar where the analysts are sharpening their 2016 numbers. Thats what happened in september and they will ruthlessly slash their forecasts on a rate hike because a stronger dollar makes it harder for our exporters to compete against Foreign Companies while cutting into their international profits from the translation from weaker currency to strong. Many companies will be if the final month of the quarter so they wont be able to support their shares with buybacks, that could exacerbate the postrate hike decline. Third, emerging markets are pegged to the dollar amount higher dollar inspired by a rate hike could cause these already weak markets to collapse. It happened in 98 and 97. Those markets do bring us down here. For example, i dont think that brazil as currently configured can survive a big rate hike. Yes, its that much on precipice. You know what, our main trading partners canada and most importantly mexico could get slammed too. Dont forget the economic advantage gives Foreign Companies the disincentive a strong dollar creates to travel here. See the hotel numbers today . They were awful. Make no mistake, the dollar hangs on the balance in this decision and a sharp spike up could be deadly. Well come back to this issue when we go off the charts later in the show. Fourth negative . Shanghai. The shanghai composite will accelerate its crash from the 3,000 level its been hanging on to by its fingernails to 5200 in june but up 800 from last year. I expect the Chinese Market to plummet another 33 if the fed tightens. Were way too linked to chinas markets even if were not that linked to its economy. Fifth, once we get our first rate increase, were going to be doing whats known as fighting the fed. Money managers know that rate hikes change. A hike takes a tail wind, turns it into a head wind. It wouldnt matter if the Global Situation were stable but its not. Owning stocks will be more difficult in this new environment. Period. I can show you a chart that says stocks rally this, stocks rally that. Trust me. Ive been through a lot of rate cycles. The only positive could be a statement that accompanies the feds action. A one and done comment that the fed will wait and see if its hike inflicts real damage could actually limited the down side, mute the reverberations. Remember, the market wants serbty and clarity, not herkineher k herkiness. A statement that sounds that will call for more rate hikes could work wonders in terms of damage control. The insane cacophony of Federal Reserve officials has created a level of uncertainty that makes no sense. Its nothing like the bernanke fed, at least not once bernanke got his act together. These jokers and i dont use that term lightly have caused a tremendous amount of selling and losses in your portfolio. Idealen should tell these various president s and governors that she doesnt want them to talk about rates and instead they should confine their comments to issues involving the Financial Health of their respective regions giving the fed chief herself the input she needs to make the right decisions. Still im not about to stamp some smiley face on any rate hike, thats because of the sixth negative and maybe the worst, the needless fedinduced surprise factor. There are always plenty of hapless hedge funds that bet the wrong way with borrowed money and some of them might have to liquidate if they roll snake eyes. At times the stress is your fellow shareholders or at least the highly margined renters who hurt you with their flailing, not the actions of the companies themselves. That said we meaning you and i can navigate anything the fed throws at us. If the market goes down big we can find stocks, we can get the right back into the stocks that keep winning because earnings wont be impacted by higher rate or a stronger dollar. Well figure it out together, thats what we do. Havent we done it for years now . Never forget, though, this is a market of stocks and markets are about supply and demand. Theres going to be too much stock supply, there is already with a tremendous amount waiting in the ridiculous unicorn wings and less and less money coming into equities everyday. Its unimaginable to me that well see more money coming in if the fed raises its rate. Most importantly we have to face important facts going into this meeting. We have had a terrific multiyear run in stocks. Theyre not cheap. At the same time, economies worldwide are turning down just when the fed wants to raise rates. Thats an unholy combination if there were one. If you didnt know better, ex employment growth you would think a fed needs to cut rates not raise them. So let me give you the bottom line as i see it going into the big meeting. The rewards real positive for stocks if the fed does nothing, but the down side risk remains enormous that the fed does the wrong thing and raises rates without commentary, its finished for both the foreseeable and i think perhaps more important the unforeseeable future. I need to go to jim in connecticut. Jim . Caller hi, jim. Im calling about United Technologies, symbol utx. Theyre down about 25 from its high. I know theyre planning on buying about a billion dollars back after the sale of sikorsky. What i dont know is what the future holds for United Technologies. I hope you can help me with that. United technologies is a Great American company and has a long tradition of doing the right thing. But i have to tell you, a lot isnt United Technologies fault. Its viewed with china. Otis sells a lot of elevators. But no matter who is in that group, theyre all being hurt, including utx. Bill in florida, bill . Caller yes. Youre up, bill. Caller yes, this is bill from st. Augustine. Its 450 booyahs to you, jim, because were celebrating our 450 years in st. Augustine this week. Oldest city and i love it. Ive been there. Id like to say i played golf but i went to the beach. Whats going on . Caller not too much, not too much. The king and queen of spain should be here but theyre keeping it secret. In any case, ive got a question about marathon oil but before that id like to precede it with the statement that goldman made that they may see oil at a 20 a gallon price and also i think Morgan Stanley came out with something talking about a projection of 50. Now marathon oil has been in a lull of 14 and its starting to climb up. I dont know, bill, let me tell you something, i talk about the travel trust marathons and why . Because marathon pays good dividends but it has to take actions and i think mro in the end is the toughest one right now of the majors to own. That said, i am not as bearish about oil as goldman sachs. 20 bucks . No, not going there. The uglier the backdrop, the more likely the fed stands pat which is good news for stocks but if the fed does the wrong thing and raises rates, im trying to prepare you for trouble on an up day. Thats what i like to do on mad money. Hey, on mad money tonight, the Federal Reserve meeting is only a day away. Does it have you sweating . I dont know. Sometimes i am. Im tackling the technicals to tell if its worth the worry. Then time of the year again, football season is under way and im revealing my dream stock draft for you and your portfolio and, yes, indeed, i won this weekend. Plus, its a stock up 30 this year and you may not even have heard of it. Ill reveal it. It could go higher just ahead. Stick with cramer [phone recording] thank you for calling. Well be with you shortly. Yeah right. Xerox Predictive Analytics help companies provide a better and faster customer experience. Hello mr. Kent. Can i rebook your flight . Im here Customer Care can work better. With xerox. Wait im here mr. Kent . gasp shark diving xerox personalized employee portals help Companies Make benefits simple and accessible. From anywhere. Hula dancing . Cliff jumping Human Resources can work better. With xerox. In this market, more than most, you really have to Pay Attention to whats happening with foreign currencies. I know, kind of boring but stick with me. You have to worry about their Exchange Rates for the u. S. Dollar. Remember last month when china announced that big surprise ewan yuan devaluation . That led to a monster selloff in the u. S. Since then the averages have barely recovered but they seem to have stabilized. Plus we know super freaking strong greenback has been the bane of all u. S. Based International Companies. The stocks are down 15 , 20 , 25 because they have to translate their overseas sales in weak foreign currencies to fewer strong dollars and many exporters are losing out to foreign competitors. If youre not paying attention these issues can come out of nowhere and body slam your portfolio. They and the fed are the principal causes of uncertainty in what many describe as a bear market. So on the eve this thursdays decision by the Federal Reserve to hike or not to hike, something that could have a major impact on currencies around the globe, you know what . Its time to get a better sense of the markets, given my endless emphasis on their power to create havoc for your portfolio. Thats why were going off the charts with the help of bob lang, a brilliant technician and the founder and senior strategist at explosiveoptions. Net as well as being the two man start of by the hindthestreets. Com. Lets deal with the fed meeting. If you listen to some people, i think it will be momentous. I even think that. I like to look at individual companies that you can make money off of by owning the stocks but, of course, as i said at the top, whether or not we get a rate hike or not is a gigantic deal for the rest of 2015 and it will matter to the trajectory of the dollar which i know unless you go overskaes you dont feel like it. Not to mention host of foreign currencies, especially the ones from smaller emerging market countries. Langes view is that if the fed tightens theyll do in the a responsible way. Theyll try hard not to spook the markets. You can argue this either way. On the one hand, china is still collapsing. Witness last nights 3. 5 plus decline in the hang shy composite and if were looking at a global slowdown that would make a rate hike not just unnecessary but irresponsible. On the other hand, lange thinks the combination of lower unemployment rate, the emergence of newfound wage inflation, last months Producer Price index on an annualized basis when you strip out food and energy costs they make it more likely that they will tighten. If that happens the allpowerful dollar gets stronger putting pressure on foreign currencies at the same time, translation, still more pain for the big u. S. Multinationals that do business overseas that im so worried about night after night, dont like the setup. But and this is a big but based on the technical metrics that lange is looking at, the market doesnt seem to be preparing for any kind of major fedinduced dislocation of currencies. What gives lange that impression . First of all the volatility index measures the level of implied volatility. Its wildly used as a proxy for fear in the market. Its dropped sharply the past couple weeks, it spiked because people were focused on it. Last friday it closed below its 20day moving average. That tells lange investors have been getting less not more affr afraid as we approach the fed meeting. So that suggest there is wont be a rate hike or it wont cause much disruption. Then there are the feds fund futures. These are contracts designed to let traders bid directly on whether the fed will take shortterm rates up or down. Based on the difference between the september fed fund futures and october ones, langes arithmetic says this futures market is signal ago 12 probability of a rate hike this week. Thats lower than the 5050 numbers you hear commentators throwing around. Lange also thinks weve seen telling options in the skew index. Another index that measures the tail risk in the, s p 500. Basically its disaster insurance although i think its just another instrument in the casino and it rallies when investors are worried things could take a turn for the worse. Lange mentioned this because on september 4 the skew index soared up to its eighthhighest level ever. People started gearing up for the end of the world. But ever since labor day this index has fallen off a cliff. That tells lange that regardless of what happens, sophisticated players are not worried about a selloff after the fed meeting. You know i am. Finally we come back to the currency markets which is really what i want to get to here. The euro has been gaining ground versus the dollar over the last couple weeks. The yen seems to have found its footing and even the pam recovered late last week. If the fed is on hold though as the fed funds futures and the vick seems to suggest, then lange could make a bullish case for the euro. Not the dollar but the euro right here and a strong euro is what the industrials need. Our Drug Companies need it, consumer package Good Companies needs it to name a few groups if the darn dollar were to come down. Take a look at this weekly chart of ifxe, the etf that measures the strength of the euro versus the dollar. All we hear about is a strong dollar but this isnt saying that remember higher on the fxe means the dollar is weaker. Lower means stronger. When you zoom out to this weekly view of the euro ux see that the european currency seemed to have bottomed. In other words, fxe, euro getting stroenger. Euro getting stronger and its been climbing slowly but steadily ever since this bottom. Some that have is because europes been improving with good auto registration numbers this week and if the fed doesnt tighten this week or puts the idea of a rate hike on hold you can expect to see the fxe fly. Lange likes the relative strength index, or the rsi, which is is up here. Its been working its way higher plus the moving average convergence divergence line, another indicator technicians use to predict changes has been flashing b inin ining buy buy b. Very bullish. At these numbers its a couple weeks away from its 50 week moving average. If it can break to 113, lange says smooth sailing to 120, that represents a tremendous rally in the euro versus dollars that will cause investors to buy stocks of the same things that keep getting thrown away, u. S. Based International Companies have been buying them hand over fist because they benefit from a weaker greenback. But very few of the big boys believe the euro moves. They think this is about to be erased by the fed. He can, lan heck, lange even thinks the japanese yen could be looking good. Theyve debased the yen forever. The fyy just made a higher low last week as it held above its floor supported 80. The yen has been in a long term down trend, no kidding, right . But just like with the euro its now within striking distance of its 50week moving average. 81. 53. If it can rally and hold above that level for a couple of weeks lange says this chart will turnbullish. Can you imagine tryi