Respecting the damage of high-frequency traders

Cramer: Market struggles to find footing

Jim Cramer is sorry. As hard as he tries, he just can't find a way to take the narrative of lower oil prices into a negative story for the stock market long term.

And while those who fear lower oil prices continue to blast out an entire asset classes of stock by selling S&P futures might be stupid, he still has to respect it.

"We must always respect that the damage inflicted by the high-frequency traders who sell all stocks when oil goes down 4 percent as it did today, can totally overwhelm all but the strongest stocks," said the "Mad Money" host.

He will allow that the selling is vicious, and it hurts. But he cannot forget that lower oil prices are fabulous for the 317 million Americans who watch their mortgage rates drop and pay less at the gas pump.

Trader on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

And while there were amazing earnings announced on Wednesday from some great companies, the market didn't care. Oil still took it down lower.

Essentially, there are overall trends in the market that trump individual achievements of companies.

What is the current trend?

"No trend freaks out investors more right now than the total collapse of oil prices," Cramer added.

When the high-speed traders who dominate the stock market see a decline in oil, they don't sit and cherry pick the best stocks to sell. They are all about speed, so they throw the baby out with the bathwater and sell the whole . They don't have the time to waste picking individual stocks and they know that when oil drops, selling everything has worked over and over again for them in the past.

Then the investors who actually know something about stocks will come in and pick through the rubble and buy high-quality companies on weakness.

On Wednesday, investors learned that while oil companies might be cutting their budgets, they are still pumping a colossal amount of oil. And while Cramer expects the oil situation to get even worse this year, oil and oil related stocks only make up 10 percent of the stock market.

And that's not the only segment that deserves to go down. Cramer argued that 17 percent of the stock market needs higher interest rates. So when the Fed also announced on Wednesday that it will not raise interest rates, Cramer expects stocks like financials to go down as well.

With these two rationales in mind, it would ultimately make sense that 25 percent of the market deserved to go down on Wednesday.

That means that 75 percent of the remaining stocks that got slammed on Wednesday are a good buy. They were hurt simply because they are a part of the S&P 500, and the high-frequency traders were freaked out about oil and dumped them like a hot potato.

In fact, the only reason why the market didn't get completely crushed is because the buyers figured it out and scooped them up.

Granted, some companies like Apple and Boeing reported such awesome numbers that it helped to pull up the market a bit.

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And if oil goes down again on Thursday, the damage of high-frequency traders could be inflicted again to cause a bear market.

Still no matter how hard he tries, Cramer can't take the bullish story of low oil prices in the economy and turn that into a long-term negative story for the stock market. Sorry.

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