Jim Cramer knows that no one wants to hear this, but we are China. It's true.
When Cramer got up at 4 a.m. on Monday the Chinese market was down 8 percent, a true crash, and the S&P 500 futures were flat. Sure enough, when investors woke up the futures were smashed, down 0.6 percent.
Some say that Cramer's theory is completely ridiculous; they think that the U.S. has nothing to do with China. They believe that our markets are not linked because when the Shanghai Stock Exchange Composite Index nearly doubled from November to June, the U.S. market did not double along with it.
So, why the heck would we be affected now that the Shanghai composite has fallen to 3,726 from from 5,191?
"The answer? Simple: because in a world where there is very little growth, we need every country to do its part to get the global economy expanding, and the stock market complex in China is doing the exact opposite," the "Mad Money" host said.
Plus, the "floor" of support in China is completely false. The Chinese government has taken desperate measures to prop up its market, such as the 1,400 stocks that were suspended, stocks that have stopped trading, new IPOs that have been cancelled and the banning of all short-selling.
It's just plain lunacy to Cramer that the Chinese market could still be up 15 percent for the year, let alone stand on its own two feet.
So, why should investors in the U.S. care?
First, there is a huge number of large American companies that export to China. Second, because it is now widely known that the Chinese communist government is not as shrewd or masterful as once thought. And third, because the U.S. market is always held hostage by futures trading, which tends to be a reaction to whatever bad is happening overseas.
Some might think that is silly, but it's a fact of life for Cramer.
It looks like Cramer's acronym FANG has come back to bite investors. Cramer coined "FANG" to represent Facebook, Amazon, Netflix andGoogle and point out the stocks that are working in the market. But on a day when the averages took a total nosedive, he warned that FANG's leadership now represents everything that is terrible in the market.
"I want people to know, loud and clear, that FANG, the isolation of a handful of stocks that can power higher in spurts like we haven't seen in ages, is a bad thing, not a good thing for the market," the "Mad Money" host said.
Right now, Cramer sees that mutual fund and hedge fund managers are desperate for growth and are willing to pay anything for it. That funnel for growth is getting smaller by the day, which sends them to look at the names with proven stories and high prospects—thus they are hungry for FANG.
However, to Cramer, FANG shows that the market is truly treacherous right now. Investors are selling everything that is not nailed to the floor, except FANG and a small handful of winners. That is a sign of desperation, not a sign of health.
"When you have a four-letter acronym that can represent pretty much the only stocks that are working in this market after five straight days of declines, that says be careful," Cramer added.
The truth is Cramer sees traders have both feet out the market door because of two sources of tension: the Chinese stock market crash and the upcoming Fed meeting on Wednesday.
One winner on Cramer's radar is Qlik Technologies, the high-quality provider of big data analytics software for enterprise. With the big data theme being a trending wave on Wall Street, Cramer thinks Qlik could be a great way to play it, up 29 percent for the year.
Qlik's software is a user-driven intelligence platform that allows people who actually make the decisions have access to analyze their own data. Meaning, they aren't at the mercy of an IT department for help.
Cramer spoke with Qlik CEO Lars Björk, who explained the concept of collective human intelligence.
"There is an enormous amount of focus on analytics, but you tend to forget that there is a human behind it that is going to make decisions. What if we collectively in an organization use the same platform, the same data sets and we together make a decision? That's what we think are the important things. Not the single point of the decision maker," Björk said.
Cramer knows that investing can get complicated. He's constantly advising which stocks to buy into weakness, but then when the weakness comes, you panic and get cold feet.
"That's not the way I like to play it. I know that discipline is a double-edged sword. You have to be disciplined enough to sell when a stock soars, and you have to be disciplined enough to buy when a stock you're eyeing gets hammered," the "Mad Money" host said.
But on days like Monday when the market hits new lows, it's time for Cramer to dust off his shopping list and circle back to his favorite stocks to see if there are any bargains lingering out there. On July 9, Cramer gave a list of 15 mine-resistant stocks that could be a good buy on the next pullback. He decided to go back to that list and see if any are ready to be bought.
First up was General Mills, which may be hard to swallow because it's down less than $1 from its highs. But Cramer thinks this one is worth it; he loves the direction its CEO is taking and he knows that if the Fed decides to tighten, this high-yielding stock will be more attractive.
Speaking of food, Cramer also likes Kraft-Heinz as it is four points off its high with a snazzy 2.85 percent yield. Finally, there was Ulta Salon. It's up 22 percent year-to-date and is finally having a pullback. Cramer called this one a buy, buy, buy.
"All that said, I'm not crazy about this market. I don't like the setup—haven't for ages. I don't like what's going on in China, and I do worry that the Fed might tighten too aggressively," Cramer added.
And while the market has had a broad-based pullback lately, there were some that were just plain jarring to Cramer.
For instance, Biogen was once one of the strongest players in the red-hot biotech group. So what the heck happened to it that it sank 27 percent last week? That's $26 billion in market cap. Wowzer!
The stock initially began rallying hard in December after it presented surprisingly strong data from an early-stage study on its Alzheimer's drug, which prompted it to shoot up more than 12 percent in two days.
Then, in January, it reported very bullish guidance for 2015. The strong Alzheimer's storyline combined with bullish guidance also catapulted the stock another 10 percent the very next day. Then, in March, investors were excited about the prospect of new information about its Alzheimer's drug.
But it turned out to be a "buy the rumor, sell the news" situation, and investors immediately started to sell over valuation concerns. To add insult to injury, the company announced disappointing results last week. In fact, Cramer considers this stock to be a three-legged stool with very shaky legs.
"I think you could easily make the case that management was being too promotional, at least until they lowered the boom on investors last week. And honestly, if we see another quarter like this one, I'll be forced to kick Biogen out of the four horsemen of biotech," Cramer said.
In the Lightning Round, Cramer gave his take on a few caller favorite stocks:
ConocoPhilips: "It yields almost 6 percent. I would buy some here, but I know that oil is going to go to $43. Everybody says it. So why don't we just wait until oil goes to $43 and then start the position. Wait a moment; it is attractive."
Cerus Corporation: "It's good. It's a nice spec is the way that I would look at it. Cirrus Logic is the stock that I think can go lower. Cerus Corporation is a nice spec."