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Cramer: Remarkable divergence in market

(Click for video linked to a searchable transcript of this Mad Money segment)

The price action of the Dow Jones and S&P 500 doesn't tell the whole story right now.

The major market indexes are currently making relatively small moves; down a little one day and up some the next. But dig down into the stocks that are currently driving the gains and losses and Cramer says you'll find something rather intriguing.

"There's been a remarkable divergence within individual sectors," Cramer said.

That means investors should not expect a macro catalyst to move the stocks of companies in similar businesses, in the same way.

"Let's take the most glaring example, which is Caterpillar," Cramer said. "We know that construction is coming back in this country, both residential and non-residential."

That would seem bullish for CAT.

"However, CAT's been executing so horrendously investors refuse to buy it as a bet on construction. Therefore shares aren't moving on developments that otherwise would be a catalyst.

Instead the market is placing greater emphasis on management – in this case, the CAT management's inability to execute.

Adam Jeffery | CNBC

Cramer says the trend isn't limited to construction – he's seeing it many other places too.

For example, in tech, stocks that sold-off due to broad industry concerns later bounced when management showed it could execute well.

"Take, if you will, Altera, a semiconductor company, reported a miserable quarter and instantly the market took down many rivals including. Lam Research," Cramer noted. "However, Lam Research reported a fantastic quarter days later and shares jumped back to where they were before the sell-off.

Divergence.

Cramer has spotted the same trend in oil services, railroads and airlines. "The importance of management is on display everywhere. We saw Delta deliver an amazing quarter Tuesday and the stock's still running higher. But United Continental missed and the stock just drifted."

Again divergence.

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Cramer thinks the trend is meaningful and should inform how investors put money to work in the days and weeks ahead.

Going forward, "Management's skill in running the business looks like it's will trump the power of the underlying sector itself.

That means investors must "pick stocks on a case by case basis," Cramer said and not trust bigger trends such as Fed tapering to impact the entire sector in the same way. "Personally, I'd start investing in best of breed stocks and avoiding sector plays."

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