Surviving These Schizo Stock Swings

The Dow plummeted triple digits early on Wednesday, only to later rally back into positive territory. Then the index took another dip, finishing the session 30 points in the red. What exactly was going on?

“The fundamentals of the economy are simply canceling each other out,” Cramer said.

Right now investors can make both bullish and bearish cases for the market, depending on which reports they choose to emphasize. This is pushing and pulling stocks in different directions, as each side acts on the data it deems most important. That’s why we can go from relapse to recovery in a single day.

Look at the market’s mixed messages: Nike’s earnings show a strong consumer, but Darden Restaurants follows immediately behind with a gloomy outlook. In housing, existing-home inventories and new-home construction are down, which is good for the industry, but still people worry about foreclosures and the expiration of the federal $8,000 tax credit. The IPO market was lifeless until A123 Systems hit the market to great fanfare – and so on and so on.

So how to how do you survive these wild fluctuations?

“Diversify,” Cramer said.

That’s why his charitable trust owns both Home Depot , which depends on strong housing numbers, and Altria , which offers a nice dividend yield.

There’s another trend playing out here, too: Money managers who missed the rally we’ve seen since March are desperate to catch up with their benchmarks. Let’s face it, no one will bank with the guy who can’t beat the S&P 500. So hedge funds and mutual funds are picking up stocks en masse every time the market pulls back. That’s why the Dow rebounded today after falling over 100 points.

These funds are pushing up tech stocks, Cramer said, because the Nasdaq is “the place of severe outperformance.” As a result, the semiconductors and other industries, such as the mobile Internet, should see a bump in share price.

Cramer’s bottom line?

“If the economic fundamentals are a push, we default to the fundamentals of the money-management business,” he said. “And, of course, we keep our portfolios diversified.”

Cramer's charitable trust owns Altria and Home Depot.

Call Cramer: 1-800-743-CNBC

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