Jim Cramer is worried that with the averages reaching new highs, stocks are at risk of being overvalued and causing trouble ahead—unless you are a savvy investor who is willing to take an educated risk.
One of the reasons why investors have been willing to pay more for stocks is because of the positive backdrop stemming from the U.S. and Europe. The "Mad Money" host thinks that the Greek bond fiasco and Ukraine-Russia conflicts have held back investors this year.
It now it looks like there could be a resolution to both of these issues, and Cramer expects that there will be a quick pop in the market, followed by a sharp decline. This is because the rally for the past two weeks was an anticipatory rally based on the resolution of these two issues overseas.
"Remember, you're rarely rewarded if you wait for a big bad event to be resolved before you start doing some buying. The big money is made when you take an educated risk that there could be a positive resolution to an event that many people fear," said Cramer.
In order to make big bucks on global events such as these, Cramer thinks investors should be on the lookout for three things next week:
No. 1 Confirmation that Europe is turning around
No. 2 Signals of overvaluation in individual stocks
No. 3 Guidance that oil has completed its downturn and will head higher