When investing in the stock market, you should always keep the bond market in your field of vision, according to CNBC's Jim Cramer. Cramer said bonds are usually indicative of where the stock market is headed.
"Look, I know the bond market is boring as all get out, but it's much larger than the stock market, and more importantly, it's very important to the overall direction of stocks," Cramer said. "It's simple: If the bond market competition gets more attractive, and the stock market gets less attractive, this can become a giant zero sum game."
When working at his hedge fund years ago, Cramer was trained to watch the bond market. It was the competition he feared the most, he said. When short-term interest rates rise, dividend stocks, or stocks of companies with high yields, will sell off, Cramer said. According to him, this is because their dividends can not provide big enough yields to compete with fixed income alternatives.
Similarly, when long-term interest rates rise, it might be a sign that the entire stock market could be worth less, Cramer explained. One to watch in particular, Cramer said, is the yield on the 10-year U.S. Treasury bond.
Cramer compared stocks and bonds to a game of basketball. If the players in the stock market have the ball, the bond market is a bit like the players without the ball, those on the defensive side who can still determine what happens to the ball and whether it finds its way to the basket.
Another thing investors should be on the lookout for, according to Cramer, is when a company's CEO steps down suddenly.
"When you see a CEO step down for no discernible reason, you know what? You should presume something is wrong and you got to do some selling," Cramer said. "I say, shoot first, ask questions later."
While Cramer acknowledged that it is possible for CEOs to step down from their positions for purely personal reasons, he said that more often than not, that's not the case. He said it's rare for a CEO to leave such a coveted position suddenly unless something is wrong at the company.
"Here's the thing: When you're investing in the stock market, it's not the exception that matters, it's the rule, always the rule," he said. "This is the kind of rule that helped keep me in the game at my old hedge fund — it's all about helping you avoid losses. And one way you do that is by not taking unnecessary risks, like betting on companies where the CEO just resigned for undisclosed personal reasons."
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