Mad Money

Cramer's warning: Market is unsafe, unsustainable

Cramer: Market is unsafe, have 1 foot out the door
VIDEO11:5711:57
Cramer: Market is unsafe, have 1 foot out the door

Jim Cramer did not trust the market rally on Monday. Somehow, all of the indicators that would normally be bad news for the averages ended up being good news, which was a red flag to Cramer that this rally is not sustainable.

Monday's market activity prompted interest rates and oil prices to rise, the dollar gained strength versus the , financial stocks rallied and biotech stocks were crushed.

"How did these things suddenly become good? Because this market is trying to find a base, trying to find its footing where it doesn't go down every day and where segments that have been hit hard can attempt to rally," the "Mad Money" host explained.

For example, last week, bank stocks were sold off when the Fed decided to maintain low interest rates. That's because banks need higher interest rates from customer deposits. However, when interest rates went up on Monday, the bank stocks went up right along with them. That made sense to Cramer.





A trader works on the floor of the New York Stock Exchange.
Getty Images

What was really strange to Cramer, though, was that the second largest homebuilder in the country, Lennar, reported a strong quarter but said that its growth was constrained by labor and land. Additionally, weak existing home sales numbers came out Monday morning.

Given that housing makes up about 10 percent of the economy, Cramer emphasized that a healthy housing market is imperative for U.S. economic growth.

"So, don't be deceived by the positive action in the banks; higher rates hurt the stock market as a whole," Cramer said. (Tweet this)

Cramer was also baffled by the action in energy. The stock market seems to have taken no solace by the fact that gasoline has fallen below $2 a gallon in many states, and the airline stocks have not benefited either.

What was really strange was that the groups that were the strongest on Monday were retail and consumer packaged goods—both huge beneficiaries of the lower cost of energy and interest rates. But, somehow, higher energy and interest rates prompted them to rally.

Things got even crazier when drug stocks were hammered mercilessly because of a tweet from presidential candidate Hillary Clinton, who said that the price gouging by drug companies has to be stopped and she will lay out a plan to stop it.

"The destruction in the biotech complex took my breath away, repealing, in some cases, months of advances after a severe decline," Cramer said.

So what does all of this irrationality in the market mean?

It is making investors uncertain and driving people away. In fact, when the market makes no sense to a guy like Cramer, it makes him want to sell into strength, not buy, he said.

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"As long as stocks don't act rationally, as long as the inputs produce the wrong outputs, I'm going to urge you to have one foot out the door at all times," Cramer said. (Tweet This)

Just as the decline on Friday proved to be unsustainable and based on nothing, Cramer warned that Monday's advance will most likely be unsustainable for the same reasons.

Ultimately, Cramer thinks it is just unsafe to see stocks move the wrong way like they did on Monday. One day they will move the wrong way and not recover like they did Monday. They could just go down and stay down.

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