It may not have felt like it on Monday, but Jim Cramer considers this week to be a minefield. The market will be completely overloaded with earnings information, and he is gearing up to stop, look and listen to all of the action.
"Remember that the professionals listen to every conference call, check every model, and do deep dives on every quarter, which means that unless they get up at 4 a.m. and work until 11 p.m.—they simply don't know enough to make proper assessments about what should be bought and what should be sold," the "Mad Money" host said.
So, what should investors keep their eye on for the week? Cramer went down the list of what he will be watching.
Tuesday: Apple, Microsoft,
Apple: Just 10 days ago this stock was gripped with fears about China that a huge chunk of buyers could have been margined out of the stock market, and therefore is less likely to migrate to the iPhone 6. If that is the case, Cramer expects a shortfall, but not this quarter.
That is exactly why Cramer warned not to trade based on headlines of Apple. Instead, wait to hear commentary about July in China and look for commentary about next-generation products that are not yet expected.
"My advice on Apple, including those of you who foolishly sold the stock when it temporarily pierced the moving average below $119, is to hold Apple until it becomes expensive, which is a lot higher than where it is right now," Cramer said.
Two of Cramer's favorite biotech stocks roared last week when Celgene announced it was requiring Receptos for $7.2 billion in cash.
But what really caught Cramer's attention was how different the stocks reacted to the news. Typically, he would expect to see the stock of the target to roar higher, which is exactly what happened. However, what as strange was that the stock of the acquirer rallied nearly 7 percent the next day and hasn't looked back since.
So what the heck happened?
"If you want to know why Celgene has run up so much, and why I think it can still go higher, you need to understand the concept of re-rating when a company's outlook, and more importantly, its growth profile improve dramatically after a major transformation," the "Mad Money" host said.
It all comes down to Celgene's dependence on its drug Revlimid, which has caused many investors to worry about longer-term prospects for the company when it goes off patent in 2027. However Receptos' drug Ozanimod has the possibility of treating many conditions with one drug, which makes it so valuable.
Cramer has said many times before that needs to break itself up. And after Johnson failed yet again to deliver an upside surprise last week, his warning comes with a dose of urgency!
Currently, the company has three different businesses under one roof: pharmaceuticals, consumer health care products and medical devices. Wowzer! Those are three diverse product lines, with virtually no overlap, all under one roof.
"I think these divisions could do better separately than as one combined company that is confusing to manage or even understand," the "Mad Money" host said.
Based on comparisons in the same industries, Cramer thinks Johnson & Johnson's consumer business could be worth $10 a share; the medical device business could be worth $63 a share; and the pharma business could be worth as much as $78 a share. When added up, that's a sum of parts valuation of $151. Considering that it closed at $100 on Monday, that's quite a boost!
One topic that Cramer spends a lot of time trying to figure out is the long-term trends that drive stocks higher. However, just because a theme is big doesn't mean it is positive, and it is just as important to be able to spot a long-term downturn so you can protect your portfolio.
That is why Cramer took a look at two of the ugliest themes out there right now, the secular declines in both personal computers and coal.
Coal production in the U.S. has been falling steadily for years. From 2008 to 2014, domestic coal production fell by an average of 2.5 percent per year. It has accelerated dramatically, as production for 2015 is down 8.4 percent year to date. And thanks to new regulations and the rise of natural gas, Cramer said that coal production is not coming back.
"When it comes to coal, the trend is not your friend, and this downturn shows no signs of abating any time soon," Cramer said.
As for PCs, this market is also in a downtrend thanks to competition from tablets and mobile devices that reduce the need to own a PC. The severity of the decline has surprised a lot of investors, with worldwide PC sales dropping 9.5 percent year-over-year in the second quarter.
As a result, Cramer warned investors to avoid anything with coal exposure and to be very cautious about anything connected to the personal computer.
But, thanks to the convergence of various events coming together, Cramer sees that FANG has revived itself in the market. First was the predicted slowdown of technology, because so many companies are linked to the downtrend in personal computer use. At the same time, the strong dollar took away the upside of leading industrial stocks.
"Don't forget, we are going to get a rate hike this fall and that will further boost the dollar, so hedge fund managers are trying to get ahead of that monumental change," the "Mad Money" host said.
There are also some junior FANGs out there, too, that investors are reaching for in a slower growth environment. Cramer listed those as Ambarella, PayPal and the four horsemen of big pharma: Biogen, Celgene, Gilead and Regeneron.
The "Mad Money" host also included two inverted drug companies, Allergan and Valeant, to the mix as sought after pharma plays for being able to crack the code of buying drug companies and integrating them to boost earnings.
"My advice is to buy them ONLY when the market is getting hammered. They come back the fastest, but they go down the fastest, too," Cramer said.
In the Lightning Round, Cramer gave his take on a few caller favorite stocks:
Alibaba: "We want to stay away from Alibaba. The only we want to play Alibaba is through Yahoo, and there we are actually worried about the tax consequences. But Yahoo is a cheap way to play it because it's kind of worth nothing after they get rid of Alibaba."
Under Armour: "OK, here is the problem with Under Armour, the stock just ran. It was languishing for the last two weeks, nobody wanted it. Suddenly it goes to a 52-week high and everybody wants it! I say as much as I like Kevin Plank [Under Armour CEO], you have to wait for a pullback which the company will give you. It's just that there is a lot of heat right now because they have endorsed the right people, but let's just wait until it comes in a bit."