Jim Cramer has noticed that there are times when investors in the stock market decide that certain stocks are not worth owning regardless of their fates.
"Yet, as is so often with this market, you can't really see the losses on the surface because the money simply rotates from one place to another. It doesn't leave the house," the "Mad Money" host said.
Cramer started by unpacking the huge declines in the stocks of Home Depot and Lowe's, which got hammered in response to two unfavorable news reports.
Home Depot's decline was particularly surprising to Cramer given the company's better-than-expected earnings report, which touted boosted sales, earnings, and forward-looking guidance.
"It sure looked like a buying opportunity given that Home Depot does well as long as long as the price of housing continues to climb, which it has, and there's increasing household formation, which there is," Cramer said.
But then paint company Sherwin-Williams reported a slowdown in do-it-yourself house painting on its earnings call, which Cramer said the market may have taken as a broader prognosis on the state of do-it-yourself home improvement, Home Depot and Lowe's primary business.
Then, Amazon announced a deal with Sears to sell Kenmore appliances on its website and equip Kenmore Smart appliances with the ability to coordinate with Amazon's Alexa.
"This is the stuff of nightmares to a company like Lowe's or Home Depot, as they derive 11 percent and 8 percent of their sales from appliances, respectively," Cramer said.
The "Mad Money" host added that the news was hardly actionable. The companies themselves have not yet seen any marked weakness in paint sales, and Amazon simply announcing a new partnership should not yet weigh on their stocks.
But just like what happened with Costco's stock after the Amazon-Whole Foods tie-up was announced, investors stopped considering Home Depot's and Lowe's successes, Cramer said.
"Just like with Costco, all of the analysts quickly defended Lowe's and Home Depot intraday, telling us not to worry," Cramer said. "However, just like Costco, it doesn't matter. People sold the stocks anyway."
Yet these losses did not push the overall market lower, which told Cramer that the money was not leaving the market, but rotating elsewhere where prospects looked better.
"Here's the bottom line: you can take your time and wait until this rotation runs its course, but you need to understand that the 'guilty until proven innocent' taint has been very difficult to shake if your company finds itself in Amazon's sights, which is why it's so difficult to own anything that tries to compete with them," Cramer said. "However, if you stay away from retail, there's still plenty to like. And remember: retail's a very small part of the entire stock market."
Watch the full segment: Cramer tracks 'the Amazon effect'
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