- Investors need to practice discipline when deciding how much stock to sell during the stock market's recent declines, says CNBC's Jim Cramer.
- "There are way too many stocks of high-quality companies that are are still way below their 52-week highs," the "Mad Money" host says.
- Still, with a global economic slowdown and a strong U.S. dollar weighing on stocks, Cramer understands investors' dilemma.
"There are way too many stocks of high-quality companies that are are still way below their 52-week highs, and, after today, are a lot closer to [their] 52-week lows," he said.
Cramer specifically flagged the stock of Johnson & Johnson, which he suspected under-promised in its lower-than-anticipated sales forecast for 2019. Shares of the pharmaceutical company ended the trading day 1.45 percent lower, roughly $10 above the stock's 52-week low.
Still, Cramer understood investors' dilemma. The International Monetary Fund just slashed its global growth forecast for the next two years, and with a stronger U.S. dollar and a "tight-fisted" Federal Reserve, domestic and international U.S. companies are having trouble painting a good picture of the near term for investors, he explained.
"How can the CEO of an industrial company tell a good story when the global economy is indeed slowing?" he said. "How can executives go out and tell us not to worry when even Johnson & Johnson sounded a little worried?"
Cramer predicted that this kind of action will lead to "a rush of traders trying to take profits" under the assumption that the market will retest, or fall back to, its recent lows as the Fed's potential interest rate increases and a U.S.-China trade talk breakdown remain as risk factors. He added that he doubted the "retest theory" would play out.
"In this environment, ... you may want to wait before you buy anything other than the stocks of companies that have already reported much better-than-expected quarters now that they're coming back to earth," he said. "We have had a huge run here off the bottom, ... so it's natural that money managers will want to take something off the table."
For the "Mad Money" host, the key to investing in this stock market is knowing your portfolio back and forth and being able to think on your feet.
"To me, this is one of those moments where you have to figure out if you can thread the needle. Are you nimble enough to sell now and buy back a few percentage points lower?" he said. "If so, go ahead. You have my blessing. But if you don't believe you can swap out and then swap back in a little bit lower, I think it's OK to wait patiently here and then do some buying at lower levels."
Disclosure: Cramer's charitable trust owns shares of Johnson & Johnson.