Just as Jim Cramer was figuring out the direction of the overall market, the price of crude oil once again broke down and brought the whole market with it.
And Cramer has known for months now that hedge funds will tend to sell stocks whenever oil breaks down, and that is just what happened on Thursday. The reason for this is because they think that whenever oil goes down, then that means the economy isn't strong enough to grow on its own. So if the Fed tightens, the stock market will be in trouble.
"I've always regarded this view as being a tad wrongheaded, because the vast majority of the companies in the S&P 500—close to 85 percent—are inversely correlated to the price of oil, meaning their earnings go up when oil goes down," the "Mad Money" host explained.
Usually lower oil prices are bad for the stock market, but good for the real world. The extra cash in consumer pockets translates to higher purchasing power.
But there is a problem.