On a hideous day like Wednesday on the market, Jim Cramer likes to remind investors that there are still a few positives lingering out here. It is just a matter of willing to do the work to find them, such as the case with low interest rates—a big positive for the housing sector.
"The idea that rates could be headed lower, perhaps a lot lower, is something to hang your hat on. Especially at a time when many people still believe that the Federal Reserve will try to tighten in the near future, despite the fact that the global economy is in turmoil and a rate hike would do serious damage to the market," the "Mad Money" host.
That is why Cramer decided to take a closer look at what the charts predict for interest rates with the help of Bruce Kamich, a chartered market technician, professor at Baruch College and colleague of Cramer's at RealMoney.com.
It is also important to review inflation when dealing with the topic of interest rates, because rates go higher when inflation is higher. However, rates tend to do nothing or go lower when we have no inflation or actual deflation.
Kamich took a look at the chart of crude oil futures going back to the late 1980s. On Wednesday, the price of oil dropped to a near six-and-a-half-year low, breaking the $41 level, and Kamich believes that the price can go a lot lower. In fact, he thinks oil futures could sink all the way down to where oil bottomed during the Great Recession.
Why does this matter for interest rates?
It matters because oil prices are a good indicator of inflation, so when oil is in a free fall that is a powerful sign of deflation. When there is deflation, it typically means that bond prices are headed higher, and yields will go down.