The problem with retail isn't that people aren't spending, it is where the money is being spent, Jim Cramer said.
When Cramer listened to the conference call of Macy's this week, and it seemed to him that Macy's wasn't acknowledging the real elephant in the room — Amazon. Instead of recognizing that it had a real problem on its hands, it said that the problem had to do with a stronger dollar impacting tourist traffic.
"In many ways, the decline of Macy's, as well as the pulverization of the stock of discount chain Kohl's after a terrible quarter and guidance today, is like what happened to the newspaper industry and the book store space," the "Mad Money" host said.
Both Macy's and Kohl's saw the internet coming, Cramer explained, but assumed it wouldn't impact them because they thought they were something special. Then they thought they could beat the web by joining it.
Ultimately, they were beaten by it.
"The problem is the web, especially Amazon, and until they face up to that fact, they are going to be in trouble for a very long time," Cramer said.
Cramer has discovered a new pattern to the stock market, where entire sectors are under fire instead of individual stocks.
Typically in the first day of a sell-off, stocks under fire in a sector would get crushed. Buyers would then step in and sift through the rubble to decide what's worth buying again. Usually it would take days or weeks for this process to occur.
"I think it's because of the commoditization by sector that has gone on in the stock market," the "Mad Money" host said.
By this, Cramer means that every big capitalization stock is now part of a sector-based exchange traded fund, or ETF. That translates into the action from a group having more of an impact than an individual company in a sell-off.
In the old days, a company would report horrendous earnings or a gloomy forecast and sellers would dump the stock and anything related to it. But they would leave alone the other companies in the sector. These days, the entire sector is blown up.
Two well-known supermarket stocks did something bizarre recently.
Two natural and organic supermarkets and two drastically different results.
No, people didn't suddenly start shopping at Whole Foods again after ignoring the place for months. Cramer boiled the reasoning for this unusual behavior down to expectations.
When a stock has been down so long that no one expects anything, a stock like Whole Foods can rally easily. But when investors have great expectations, like they did with Sprouts Fresh Market, the stock can get hammered.
"Personally, I would avoid the whole space for the moment. Retail is tough right now, with Amazon making inroads even in the grocery business," Cramer said.
Another head-scratching stock was Stericycle, which has been one of the most consistent stocks out there and suddenly fell off a cliff.
Stericycle is the medical waste disposal company that also handles drug recalls, company compliance with ISHA, call centers and document shredding.
"I want to talk about it because it is so instructive of what happens when you try to catch a falling knife, because you think it just has to bounce. But it turns out, oops, you were just a butcher block without a ready-made slot," Cramer said.
Cramer found that while Stericycle had a strong run from 1996 to October 2015, the stock didn't start to go down until six months ago. Yet, the fundamentals have been eroding for years. This is why he recommended avoiding it, until there are further signs of stabilization.
In the Lightning Round, Cramer gave his take on a few caller-favorite stocks:
Match Group: "It's a buy. It has terrific growth; we recommended it on the show after doing a ton of work on it at first. As first, we were a little skeptical and decided no, it's a real good one. I think they've got great growth. I would be a buyer."
MobilEye: "MobilEye is a highly valued internet of things play that is linked too much with autos, and I'm not going to go there because I think that it doesn't matter how well they do it, it's not enough anymore. When I see those situations, I've got to stay away."