As much as Jim Cramer wishes earnings season were over already, he knows this is no time to sit back and put his feet up. Investors are still in the thick of it, which is why he has shared his rigorous game plan of stocks he will be watching next week.
"Yes, it is another minefield of earnings reports, made even more difficult by the sheer number of new companies that have come public in the last few years," the "Mad Money" host said.
With China and earnings on the mind, here are the stocks that Cramer will have on his radar next week:
Tuesday: Chinese PMI, CVS Health, Regeneron, Disney, Pioneer Natural Resources
Cramer wants investors to be prepared for disappointment, as China PMI is an important gauge for how the Chinese economy is doing. Just be aware China can lurk like a hidden dragon and breathe fire on U.S. stocks with an intense level of force.
"I need you to be ready for a sharp Chinese market selloff that can then impact our market," he said. (Tweet This)
CVS Health: If the PMI is poor, then there could be a buying opportunity for US-based CVS. Cramer expects yet another excellent quarter, which could be overshadowed by a China selloff and create an opportunity.
Regeneron: The tie-up between Regeneron and Sanofi, which owns 22.6 percent of Regeneron. The two are collaborating on an anti-cholesterol drug, and the news has overshadowed their new partnership to develop cancer drugs.
Cramer likes Regeneron for a long-term play, but if the market fails to recognize its new developments on Tuesday this could be an opportunity to buy the stock. Cramer wants investors to take advantage of this opportunity that could go unnoticed because it is a chance to buy Sanofi, too.
In Cramer's opinion, those who think that it is bad for the market to go down when job growth is strong do not have a clear understanding on how the Fed works long term. It is good news when more people have jobs, the country is wealthier and the economy is strong.
But not everyone agrees with Cramer, so he decided to review their argument and why he thinks they are wrong. Many think the market has rallied so long because there is easy money floating around because the Fed has propped it up.
The people who think this have four misconceptions, according to Cramer:
First, they think that stocks are up right now because they are just vehicles that are being used for income and thus they will lose this status if rates go up. However, Cramer does not agree with that point of view unless there have been several rate increases already because a stock that yields even 3 percent is still more attractive versus bonds.
The second is the economy will fall apart as soon as rates increase because it is too weak to handle even the slightest move. Yet, Cramer has seen the economy experience whole quarters with dramatically lower growth.
The third misconception pertains to the critics who think that any time rates go up, the dollar will get stronger and exporters will be hurt by the translation of the dollar and overseas competition. While both of these issues do have a degree of truth to them, Cramer warned not to get spooked and sell stocks too early when the Fed tightens because that could damage your portfolio too.
Ultimately rates are so low now that Cramer thinks the country would need to see significant increases in rates before there is a genuine impact to the growth of business.
"I don't think you have to sweat these increases. However, that, again is not enough to assuage those who think the Fed will go on autopilot and raise and raise without being data dependent," Cramer added. (Tweet This)
Either way, there is no avoiding low growth. So what if the Fed does raise interest rates? Cramer spelled out what this could mean for your portfolio.
"Welcome to the world of intense rotations, which have already begun since the Fed signaled in 2014 that things were getting too good to stay accommodative," the "Mad Money" host said.
If this were the old days, Cramer would recommend investors go for industrial stocks because their earnings will improve as the economy improves. However, that is no longer possible as most big industrial companies have become too dependent on overseas earnings, and a stronger dollar will create challenges as cash floods into the U.S. and away from countries across the ocean.
Cramer also warned investors to be careful when reaching for trades that have always worked in the past. In addition to skepticism about the industrials, that also means investors must be careful when buying large tech companies that have exposure to Europe. (Tweet This)
One group that always benefits from higher rates are bank stocks because higher rates mean they earn more money from cash deposited. But what else will work besides the banks?
Cramer said companies that have the biggest year-over-year earnings revisions, such as the U.S. industrials that do not have a lot of overseas business, are a good bet as are the high-growth stocks that aren't dependent on economic growth to do well, but can get a boost from the economy doing well. He also recommended restaurant and retail stocks that have already benefited from growth.
Ultimately if rates go up, Cramer says investors should move towards more economically sensitive stocks. However, it is important to recognize many international stocks may not do well because of overseas exposure and a strong dollar. In that case, gold could become the go-to play on inflation.
"We recognize that the stocks bought for yield will be sold and that bonds with low coupons—low interest bearing paper—could be dangerous," the "Mad Money" host said.
With this in mind, many investors will want to create short positions against the market. And while Cramer is not allowed to create short positions in his Charitable trust, he did short almost every day when he worked with Karen Cramer at his hedge fund. In fact, Karen Cramer hated long positions and loved the short side.
And Cramerica is just in luck, because Karen Cramer shared her short-selling rules with Cramer. Rules that are timeless and can still be applied today.
Rule No. 1: Called the Business Week cover rule. At the time, this publication often featured companies on the cover and when it did the stocks jumped. Thus the rule to never short a company that could be on the cover of a big publication was born.
"I have augmented this rule and it's very simple: never short a best-of-breed company. There are so many crummy, awful companies out there, why bother to short a company that is a standout that could be considered among the best of the best just because you are hearing a negative story? Move on," Jim Cramer said. (Tweet This)
Rule No. 2: Ask yourself, can the company be taken over? If it can, then don't short it. Cramer was burned on this rule three times in his career, and when he looked back he remembered that there were takeover rumors about all of them. He ended up taking a loss on all three companies.(Tweet This)
"I know you might be itching to short. I am just begging you to realize that there is substantially more downside and you must be much more disciplined if you are going to pull it off right," the "Mad Money" host added.
In that case, it might be a better idea to raise cash and be ready to use it in the next Fed-related downturn.