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As the market dipped lower Tuesday, after a three-day winning streak, Jim Cramer saw housing as the one plump goose in the market. And while it might not be a golden goose, Cramer fears that if it gets killed then we are all in trouble.
The averages relapsed back into international purgatory on Tuesday when the Chinese stock market took a nosedive, emerging markets like Mexico and Brazil were weak and the dollar strengthened yet again.
"When you have this combination, it's almost impossible for the market to rally. There are just too many companies that do poorly in that scenario," the "Mad Money " host said.
The real concern for Cramer right now is China. The stocks themselves aren't that important, but a lot of the individual names that are stressed out right now are important. The financials seem to be stressed and unhealthy, and Cramer is unclear if China has been transparent on how these banks are really doing.
The one thing that Cramer does know is that before China broke down, it had a plan to make consumers wealthier in the stock market. It took the cue of Ben Bernanke and cut interest rates in order to entice investors to buy stocks for yield. In return, that drove up stocks, which created greater wealth.
That is exactly what the Chinese government attempted to do, but it went wrong. It put money to work into a bunch of junk companies, not the high quality bond-market equivalents. Then, it allowed investors to use an obscene amount of margin to buy stocks, which led to the unstable disaster that the Chinese stock market has become.
And while the U.S. market did not roar when the Chinese stock market skyrocketed into the stratosphere, Cramer warned that it will react to the Chinese crash. In his opinion, this crash revealed that the Communist Party is less powerful and prudent than initially thought.
"They are, alas, not invincible, and we are beginning to believe that perhaps they don't even know what the heck they are doing," Cramer said. (Tweet This)
The confusion seems apparent to Cramer when he thinks about some of the silly moves that the Chinese government has made. It basically criminalized short selling. It created a bureau of stock buying to prop up stocks and it closes trading in stocks all the time. What the heck?
"This stuff, frankly, is insane, but nobody likes to say it out loud because the capitalist roaders running Communist China are supposed to be better, smarter and more powerful than we are," Cramer added.
It really put the icing on the cake when China decided to devalue its currency in one fell swoop. This move shocked Cramer, as the devaluation was sudden and six times bigger than what it has done in the past decade.
At this point, with the strong dollar wreaking havoc on American companies doing business overseas oil dropping lower, the only thing that is really working is housing.
Cramer has seen in the past that housing can be an amazing tonic for the economy. The U.S. is on pace to build 1.2 million homes this year, which is on par to the rate before the Great Recession. That is great news for the economy.
And there have been many days recently where China behaved itself, the dollar didn't go higher, oil stabilized and interest rates went down. We could easily have another one of those days on Wednesday.
Read more from Mad Money with Jim Cramer
The important thing that Cramer wants investors to understand is that housing has become the goose of the market. So, on days like Tuesday, it may give the impression that that the market is strong enough to power through the bad news of China.
"But if China gets hammered again and the dollar goes still higher, and we get some Fed head saying rates need to be raised, then the set-up will be very bad, and I need you to be ready for some turmoil," Cramer said.
So, while housing can work wonders for an economy, it won't work wonders for the stock market. There is just too much that can go wrong for the housing goose to carry the market. Time to buckle up for more turmoil ahead.