Top Stories
Top Stories

Watch out! The market's No.1 enemy right now

Cramer: Supply enemy of bull market

Jim Cramer often teaches investors about game changing elements of the stock market that can impact a portfolio. He has spoken in the past about everything from earnings to commodity prices, but this time he sees something different. This is one thing that could bring down the entire market, and perhaps change history.

"That's why I spend so much time focusing on trends related to the mechanics of money management, because even though they may seem totally mercurial, they can also be extremely deadly," the "Mad Money" host said.

The deadliest trend out there is supply. And for the longest time, there hasn't been a ton of it. We currently have approximately half the amount of IPO deals that we had last year at this time. Companies seemed to have a big appetite for their own stock, and buybacks have become a staple.

Meanwhile, there have been billions in dollars of mergers that managed to retire boat loads of stock. Investors are starting to think that if they held onto a stock long enough, the company will eventually just get a bid. Just think about the Kraft or Allergans that cashed in when Heinz and Actavis called in.

GoDaddy CEO Blake Irving visits on the floor of the New York Stock Exchange as the website hosting service makes its initial public offering (IPO) on April 1, 2015 in New York.
Getty Images

Wednesday marked the first day of a trend that could change the game and kiss the value of stocks goodbye. Cramer saw a flood of stocks deals from companies that offered shares that investors didn't want, or required investors to liquidate other stocks so they can buy new ones.

"The stock market is like a department store that can only stock so much merchandise. At a certain point…you have to discount the existing merchandise to get it to move," Cramer said.

The plethora of IPOs with questionable fundamentals, and secondary deals worried Cramer the most on Wednesday.

First was an IPO for GoDaddy, and the "Mad Money" host has never been a fan of this company. Cramer wasn't so giddy over GDDY. Not just because of its ridiculous antler hats, but because it has never managed to be profitable in its 18 years of existence. If you got in on the GoDaddy deal, Cramer thinks it's a good idea to ring the register on Thursday after its big run.

Etsy's fundamentals are also questionable, especially considering the immense losses incurred by the company over the years that make Cramer speculate on its profitability.

Additionally, offerings from Abbott Labs and Burlington Stores flooded the market. Shares of Burlington were offered by selling stockholders, inclusive of a few private equity guys.

"You're buying from people who may be much smarter than you, which is something I always try to avoid," Cramer added.

Cramer wouldn't be so worried about these deals normally. But they are coming in right after seven offerings from seven biotech companies that have lost money over the years. It's too much!

Read more from Mad Money with Jim Cramer
Cramer: Big portfolio moves next quarter
Cramer: Capitalizing on Google weakness
Cramer: S&P charts—time to cash in!

Granted, no April has ever been down in the third year of a sitting president. Cramer is aware of this, and agrees that the market could be due for a bounce after Friday's key employment numbers come out.

But in the end, the biggest enemy of a bull market is supply. Cramer can't ignore the fact that there is an overwhelming amount of it right now, and wants to make sure this is on the radar of investors as we begin a new quarter.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
- Jim Cramer Twitter - Facebook - Instagram - Vine

Questions, comments, suggestions for the "Mad Money" website?