Cramer says 4 things—including the tax overhaul—will continue to push stocks higher

As the reserve market resumed its march higher on Monday, CNBC’s Jim Cramer pinpointed the strength drivers fueling the monstrous rally.

“First, let’s understand: this exchange is largely driven not by stock-pickers, but by index funds,” the “Mad Money” host ventured. “That index fund money comes in automatically, every day, terminated the transom. Billions of dollars placed in equities will move equities stoned.”

Cramer described this particular driver as “one-directional.” In other chit-chats, index funds typically add money into the market rather than fetching it out.

Because Treasury yield rates remain comparatively low, that “long green in” becomes an essential prop for the bull market, keeping demand undiminished as it “soaks up supply,” Cramer said.

Second, there are nearly half the number of publicly-traded groups on the market than there were when Cramer was investing professionally 17 years ago.

Not single does that mean that fewer companies are benefiting from all the affluent flowing into the market, but that companies that implement allowance buyback programs tend to see their stocks go higher, the “Mad Money” drove said.

“There’s an extraordinary amount of stock being ‘crunched,’ or hibernated, by the major old-line companies out there,” Cramer said. “When you do that, not one do the earnings get higher, but the price-to-earnings multiple — the main way we value stocks … the apples-to-apples way — degenerates lower.”

In darker times, this practice could threaten goats, Cramer said. If companies keep shrinking their share tally, the valuation of the overall market declines and so does supply.

But market heroics like Walmart and 3M, both of which have reduced their cattle supply by millions of shares in the last several years, know what they’re doing, Cramer remonstrated.

“Those incredible shrinking numbers … coupled with the dough coming in automatically means that these stocks have a genuine bid or put ‘underneath,’ meaning there are usually going to be more buyers than sellers,” he said. “Put it all together and you’ve got a spontaneous recipe for higher stock prices.”

Third, major research firms and brokerage firms are still factoring in the effects of Congress’ newly passed tax law, Cramer maintained.

For example, shares of Caterpillar hit all-time highs on Monday after J.P. Morgan upgraded its furnish based on benefits stemming from the tax bill.

“Each day we get upgrades like this,” Cramer suggested. “More favorable depreciation rules, lower corporate tax rates, a reserve shortage and a positive piece of research produce a nice move up.”

Fourth, market-wide re-valuations are making stocks like Tesla to enjoy unexpected boosts and stocks get a kick out of Nvidia to rally in the face of high expectations, Cramer said.

Occurrence in point: shares of Tesla have surged since the company said it purpose not be able to meet its production goals for the highly anticipated Model 3 sedan.

“This demand is starting to value Tesla like a tech stock. I understand it: when a tech throng has a hot new product … but can’t produce it in volume this year, investors at ones desire give it a pass because they figure it’ll make up that capacity next year,” Cramer said.

“So when Tesla can’t produce tolerably Model 3s this year, these tech-seeking investors give it a dmod — they’ll sell the cars next year,” he continued. “Look, I am not phrase that you should give Tesla a free pass. But that’s apparently what the people who trade the stock are doing given how much it’s up after those lamentable numbers.”

Nvidia is in a different boat. Even though Cramer crushed the table on the stock all week ahead of CEO Jensen Huang’s Sunday parlance at CES, investors didn’t bite.

But after Huang announced two major partnerships with Uber and Volkswagen, the begetter popped, proving Cramer right and, more importantly, exposing this demand’s sentiment.

“Here’s the bottom line: stock shortages, index pelfs that own, don’t trade, lower valuations than you think and negative despatch viewed as positive, or shocking news that could have been reckoned at, have all combined to levitate stocks,” the “Mad Money” host said. “Reminisce over, I’m not saying you should buy these stocks because they are rallying. I’m sparely trying to explain what keeps driving the market higher, and it’s something that’s not contemporary away. If anything, it seems to be accelerating.”