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“If you take a step back, there’s a lot of logic at the level of individual stocks and sectors even as the overall market seems to confound people continually,” Cramer said. “The key to this moment is that you just have to recognize what’s working and what isn’t.”
The commodities are in a severe downturn right now, as best represented by the falling price of oil , Cramer noted. Thanks to Europe’s debt crisis, the region is simply using less of every commodity. The economy is slowing in Latin America, too. Meanwhile, the price of oil can’t go any higher because there is too much supply. A perceived cessation of geopolitical tensions seems to have caused an oil glut, Cramer said.
In turn, stocks of companies that use oil or other commodities are doing well. But stocks of companies that involve commodities, or those that are thought to need strong commodity prices, are falling.
So instead of talking about “risk on, risk off,” Cramer thinks it’s a better idea to view stocks through the prism of commodities. After all, companies that take or pay for commodities are going higher while shares of companies that rely on growth in demand for commodities are struggling.
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