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Playing the Pullback

Viewers must rethink their investing strategies, Cramer said Thursday, given a recent string of bad news. He’s certainly adjusted his. Whether it was this week’s earnings reports or the release of disappointing economic data, he saw no choice but to trade offense for defense. At least until this pullback in stocks plays itself out.

“We are staying defensive,” Cramer said, “until proven otherwise.”

During last Friday’s Game Plan, he pointed to specific events that would make either a bullish or bearish case for the market. If General Mills reported a strong quarter and investors went after the stock, it could indicate a growing pessimism about the economy. If payroll-processing company Paychex announced its quarter and had nothing good to say about hiring, the reaction could be much the same. And if Bed, Bath & Beyond delivered good numbers but Wall Street didn’t seem to care, then it was definitely time to reassess.

Sure enough, that’s exactly what happened. Even more, Thursday’s existing-home sales number was off, oil was down all week, and even copper took a hit. This helps to prove the defensive thesis, Cramer said, and it’s the reason his charitable trust has been taking profits in its industrial holdings and moving into more so-called safety stocks. He predicted a 3% to 5% decline as the market pauses before its next leg up.

Cramer also told viewers to watch AAR’s quarter. Good news from this aircraft-maintenance company would make Boeing and its 3% dividend yield more attractive. Well, the good news came.

Lastly, because we’re playing defense, investors can buy some defensive stocks. Cramer said he likes Procter & Gamble and Kimberly-Clark , a high yielder that benefits from the weak dollar and cheap natural gas.

What’s the big takeaway? Pre-plan your reaction to market events before they happen. That way you can make calm, rational decisions if stocks turn downward, as they have this week.

“You have to know what could cause you to change your mind about the market before it happens,” Cramer said. “Otherwise you’re just going to make excuses for sticking to your same view … no matter how wrong it is.”

Cramer's charitable trust owns Procter & Gamble.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

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