With such volatile swings to kick off the first week of 2016, Jim Cramer is ready to switch from capital preservation mode to capital appreciation mode — something that needs to happen before a sustained rally can begin. Especially for Petrobras, which Cramer considers to be the worst stock in the world.
"I've put together an extensive checklist of the things that need to happen before we can be more concerned about making money than we are with not losing money," the "Mad Money" host said.
Cramer selected 14 events that need to occur in order for the market to find a bottom, and stocks to stop endlessly losing money:
No. 1 Federal Reserve must change its debilitating narrative that it adopted after the first rate hike. While Cramer understands that the stock market is not the Fed's main concern, the Fed needs to know its own strength and recognize that when it speaks about the need for four more rate hikes in 2016 — that creates tremendous uncertainty. Cramer wants the Fed to be more data dependent, not just on employment, but other factors such as deflation and slowdown in various areas of the economy.
No. 4 Commodities need to bottom. The persistent deflation for all commodities has caused entire countries to derail, not just their stock markets. Materials such as copper, tin, iron and aluminum remain in free fall because of China. This has created an environment that cannot be invested in.
No. 5 Oil must stop going down. Bankruptcies and reorganizations must occur this year because a lot of companies are in distress. Players such as Petrobras, Chesapeake and Freeport-McMoRan are running out of capital and may have a hard time paying debt.
"It all comes due in 2016 if oil doesn't stop going down, and I don't think it will without a huge geopolitical crisis occurring in the Middle East," Cramer said. (Tweet This)