Mad Money

Cramer's game plan: No common stock is safe until the volatility bets unravel

Key Points
  • "Mad Money" host Jim Cramer looks ahead to key stocks and events investors should watch next week as the stock market lifts from its lows.
  • Cramer warns that it won't be safe to invest in common stocks until risky volatility bets are unwound.
No common stock safe until volatility bets unravel
VIDEO1:1001:10
No common stock safe until volatility bets unravel

After the worst week for the market in two years, CNBC's Jim Cramer stuck to his mission to keep investors' fears at bay.

"You've heard it all, and I just have to keep in front of you that much of the selling we saw [Friday] was deeply related again to the incredibly large bets against volatility made by clueless money managers who expected things would remain calm as they had for ages," the "Mad Money" host said. "But in the end, we rebounded."

Keeping these risky bets in mind, Cramer turned to his game plan of stocks and events to watch in the week ahead:

Monday: Volatility bets

On Monday, Cramer wanted investors to keep an eye on the risky, leveraged funds that enable traders to bet against volatility, defined as the amount of uncertainty in the size and direction of changes in the market and most commonly tracked by the CBOE Volatility Index, or VIX.

"These funds led the market down today and when they started to rebound, they took the market with them," Cramer said.

"As much as I hate them and I think they are useless and a pox on your portfolio, they are totally and completely and utterly in charge, and do not let anyone else tell you otherwise."

The "Mad Money" host argued that these trading instruments made the sell-off significantly worse by forcing the hedge fund managers who bought them to cover their losses when volatility spiked. To do that, the managers sold S&P 500 futures, sending stocks lower.

"These trades need to be unwound in full, and you can watch the process play out by following these three toxic volatility instruments: the UVXY, the VXX and the TVIX," Cramer said.

"So put those symbols up on your monitor. They're the proximate cause of the decline and they'll tell us all we need to know at 9:30 a.m. If they open down big, we might be in the clear. Up big, and I'm going to tell you, we resume that sell-off that we saw intraday."

Tuesday: PepsiCo, Under Armour

PepsiCo: If the volume in those risky trading vehicles dries up on Monday, Cramer will turn his attention to PepsiCo's earnings report.

"PepsiCo has a history of meeting and beating its numbers and raising forecasts, as CEO Indra Nooyi has done such an amazing job stabilizing the soda business while unleashing all sorts of good and good-for-you snacks," the "Mad Money" host said. "If the numbers are good and PepsiCo opens higher and the VIX cools, then we're going to have a real nice day."

Under Armour: Sports apparel maker Under Armour will also deliver its quarterly report, and Cramer wondered if the company will announce that it has its inventory under control.

"I actually believe CEO Kevin Plank has a chance to lead a renaissance of the company, and with the stock down at $13.75, I think it's running out of downside," he said.

Wednesday: Cisco, Marriott International, Applied Materials

Cisco: Tech giant Cisco will report earnings on Wednesday. Cramer pointed out that not only is Cisco one of the biggest beneficiaries of the new tax code, but it is morphing into a software play thanks to some of its recent acquisitions.

"CEO Chuck Robbins is well on his way to making this one of the best ways to invest in the internet of things, and who can resist that juicy 3 percent yield?" Cramer asked.

Marriott: The hotel chain has a winning stock that was barely brought down by the week's declines, so Cramer was bullish on it ahead of its earnings report.

"I recommend buying Marriott into any VIX-related nonsense before the quarter," he said.

Applied Materials: Cramer was particularly wary of what Applied Materials' Wednesday earnings report could mean for the entire semiconductor cohort.

"I think Applied Materials is a winner down here at these levels," he concluded. "It's worth nibbling on going into the quarter."

Thursday: Waste Management

Cramer expected a strong quarter from Waste Management when it reports on Thursday due to its voracious share buyback program and the boost from post-hurricane construction in Florida and Texas.

Friday: Coca-Cola, Kraft Heinz, Deere, Newell Brands

Coca-Cola: With a new CEO at the helm and the stock down at buyable levels, yielding 3.5 percent, Coca-Cola's prospects looked healthy to Cramer ahead of its Friday report.

Kraft Heinz: Like with Coca-Cola, Cramer was confident in Kraft Heinz's management and steady dividend.

"I suspect they have something up their sleeve to turn things around because oh my, has it been a horrible stock," he said.

Deere: Shares of Deere are down far from their highs, but that didn't stop Cramer's optimistic outlook.

"The agriculture feed-the-world trade is very much 'game on,'" he said. "After years of pain management, Deere's become quite adept at telling its story. I really like it ahead of the quarter."

Newell Brands: A proxy fight at the upper echelons of Newell Brands has complicated the outlook for the consumer products company.

After Newell bought Jarden, Newell CEO Michael Polk forecast good times ahead. But the plan went awry, causing former Jarden CEO Martin Franklin to recruit an activist fund to try and oust Polk and Newell's entire board.

"Polk's tried his best, but he's really dropped the ball and he's cost shareholders fortunes in doing so," Cramer said. "If the company can report a good quarter on Friday, maybe he keeps his job. A bad one? I think Franklin unseats the whole lot of them. And that's how much pain's been inflicted here."

Final thoughts

"Here's the bottom line: the VIX busters are still in charge. You need to see these pieces of paper calm down and calm down now. I wish they were banned," Cramer said. "If they don't stop, no common stock is safe. If they do, we should have a huge relief rally like we had this afternoon as long as interest rates also go down. And now you know how to play it."

WATCH: Cramer's volatility-focused game plan

Cramer's game plan: No common stock is safe until the volatility bets unravel
VIDEO11:5511:55
Cramer's game plan: No common stock is safe until the volatility bets unravel

Disclosure: Cramer's charitable trust owns shares of PepsiCo and Waste Management.

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