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Breaking the relationship for oil and the S&P

Cramer: Where oil will go

The dark orb of oil has had a grip on the market lately, and they seem to be working hand in hand. When oil goes lower, the stock market gets hammered; when oil goes higher, stocks finally rally.

Jim Cramer thinks this is hogwash! After all, cheap oil is great news for most companies, which show greater earnings, and consumers, who end up with extra dough in their pockets.

"There's no fighting this linkage, even though, as I keep telling you, it's really opposite of what should be happening longer-term," he said.

So, as long as there is this ridiculous linkage between the and the price of oil, Cramer is going to try to explain the relationship between the two. What better way to predict the direction of these two elements, than to consult the charts?

Cramer spoke with Bob Lang, a technician who is the founder and senior strategist of Lang calmed some fears, explaining that he agrees that the recent action in oil has been absolutely hideous. But the downward slide of black gold is not unprecedented, and it's not the end of the world.

Essentially, Lang thinks oil could still go lower. When he consulted the daily chart of West Texas Crude, he sees that oil is oversold. When oil is oversold at these levels, it will do so for a long time. And though there was a bounce in oil on Wednesday, he pointed out that rallies tend to be aggressively sold soon thereafter. The question is, when will it stop?

"Trying to call a bottom in oil here is like catching a falling knife—you'll just end up with blood all over the place," the "Mad Money" host said.

The good news is that even though oil will be ugly for a while, that doesn't necessarily mean the stock market will be ugly, too. Lang believes that there is a good chance the market does have the potential to go higher, even when oil keeps falling.

Yes, there was a nice rally on Wednesday. But would the averages really have been up if oil hadn't been up, too? Probably not. But have no fear, it is possible to break this linkage!

Lang pointed out that at the horrendous oil declines in history, the market has been able to break away from oil and reach new highs on days when oil was down. For example, in 1991, when oil was down more than 32 percent, the S&P rallied 30 percent. This is part of the reason why Lang thinks this could be a great moment to buy.

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"You just had to wait for the positive repercussions and not be confused by days like today where both oil and the S&P rally," Cramer added.

So while the mood of oil has controlled the direction of the averages thus far, the charts interpreted by Lang suggest that it won't be like this forever. In the medium term, the S&P 500 could keep climbing further, even if oil continues to tumble. It's happened in the past and could happen again.

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