The market turned ugly this week, as Jim Cramer saw the same elements that wreaked havoc in the past return. Once again, the strong dollar and lower oil have managed to sink stocks.
"Perception always trumps reality, at least initially. Sooner or later, though, we will settle into a fact-based situation where we can try to make money off of what is actually happening, not the bogus nightmare scenarios that are so easily traced out," the "Mad Money" host said.
Crude has now declined more than 20 percent from its recent highs. Cramer found it remarkable how much investors didn't care when oil plunged to $40 a barrel from $50. The entire market still moved higher as it happened.
However, when oil dipped below $40 a barrel last Friday, black gold once again coupled with the averages and took stocks down. This is because of a growing belief that auto companies, which reported weak sales on Tuesday, are signaling a slowdown and the weak oil market signals the same thing, Cramer said.
Where does that leave stocks? If the market is once again tied to the price of oil, Cramer expects the banks to fall next if oil continues to plummet. While he doesn't think this is a real concern, he still wants investors to be prepared if it happens.
Cramer spoke with Carley Garner, a technician and commodities expert who is the co-founder of DeCarley Trading, author of "Higher Probability Commodity Trading" and Cramer's colleague at RealMoney.com.
Garner found that the sell-off in oil has occurred in an orderly fashion so far, which is why the stock market ignored it and didn't fall along with it at first. However, as crude heads lower, she expects the weak-handed bulls to get washed out, crush oil and send the stock market even lower.
"Once the smart money gets wiped out ... Garner thinks oil can start rallying again, which would be a welcome sign for this market," Cramer said.
First, Garner said investors should brace themselves for more damage.
In her experience, bottoms in oil tend to be very dramatic and painful as weak-handed bulls are flushed out. Unfortunately, she said the market hasn't seen a real washout yet. She expects oil to fall to $38.50 or even $32.50 a barrel if things get worse. She thinks it is more likely that oil will push its floor of support at $34.50 a barrel, and if it holds, then crude will rebound.
Cramer also had a memo for investors. When CEOs of major companies says the environment has become tougher, they really mean it.
No, it is not just small-talk.
Last week Ford Motor CEO Mark Fields acknowledged the auto industry faced a difficult environment. Ford's monthly sales numbers were released on Tuesday and indicated a 3 percent drop, even though the consensus expected only a 0.5 percent decline. As a result, Ford's stock plunged more than 4 percent.
"This, to me, is where I find the obvious nature of investing so unnerving," he said.
When the market is slammed like it was on Tuesday, it can create buying opportunities in companies that are doing well. One of those companies is ServiceNow; the cloud-based software firm that helps corporate IT departments develop internal applications.
ServiceNow also provides enterprise software to manage and automate various functions for a company's human resources, legal, finance, security and marketing departments.
Yet, ServiceNow is now trading below where it closed last Wednesday, before it reported a strong quarter. The company had 5-cent earnings beat and higher than expected revenues. It also added a large number of customers in a short period of time, rising to 272 customers that were paying more than $1 million, from 249 customers.
"That's actually a very key metric that we report every quarter," ServiceNow President and CEO told Cramer, "The reason is that we laid out a $4 billion revenue target for 2020, so this gives our investor audience an opportunity to monitor our progress to that goal."
Cramer noted a more creative way to play the healthcare space with Alexandria Real Estate Equities (ARE), a company that benefits from the work done in the biopharma industry - its stock has the yield that investors seek.
ARE is an urban office space real estate investment trust that specializes in owning science and technology facilities in what are called "innovation cluster locations." The concept is that science and technology companies tend to cluster in certain areas, and ARE invests in high quality office properties in those areas.
Cramer spoke with ARE's chairman and CEO Joel Marcus, who said the company had positioned itself in the dominant cities such as Cambridge, San Francisco and New York in order to be the dominant force in collaborative urban science campuses.
"I think the most important thing is if you think about 10 years from now, not too far away, 75 percent of the workforce will be millennials. So, we try to stay ahead of the pack and we have thought about the urbanization trend back for the last decade," Marcus said.
In the Lightning Round, Cramer gave his take on a few caller favorite stocks:
Five Below: "Five Below is like Dollar General, Dollar Tree, TJX and Ross Stores, except for I think it has moved too far. I want to say ring the register. A little profit taking for Five Below wouldn't hurt anybody."
Posco: "Engineering, construction and steel. I say stay away. If you want to own a company in this segment, you might want to own Nucor. That's the one I feel most confident about."