The Big Money Is Moving in Lockstep

Yes, everyone has the same trade on. Yes, the big money just moves in lockstep. They do not learn. They simply do what everyone else does. It is amazing to me. It is what happened last year, and these people just totally repeat themselves.

This is the total commoditization of the markets to the point that if you actually do some work on a company, it is almost always a total waste of time.

Remember last year? If you don't, just take a look at Freeport-McMoRan (FCX - commentary - Trade Now). FCX was the trade. On the way up or on the way down. The secondary trade was National Oilwell Varco (NOV - commentary - Trade Now).

So, you take a look at the Freeport and see that last year at this time it was at $120. Six months later, it was at $16. National Oilwell? $92 to $17. That means you got group-think on the upside and group-think on the downside. Neither stock could handle the onslaught up or down.

Could it be happening again? Sure. The same accounts that chose not to stock-pick and instead just put on a weak-dollar/long-commodity trade don't ever seem to recognize:

1. That "everyone" else has it on, meaning that they believe the stocks are levitating because they are right about the direction of the commodity. Heck, they are the reason for the commodity and the stocks going higher. The blitzkrieg up happens too soon to create supply of either.
2. On the downside, the commodities are kept up by margin buying and by China. If China walks away, there is no more reason to run ahead of that client, and the stocks, which are also bought on margin, just totally unravel.

The only difference this time is that we have harder to fall.

I think this is the case for all commodities, particularly oil, where I believe there is less demand right here from the real market and more demand from the hedge funds.

So the virtuous circle morphs into a vicious cycle.

Now, there is good news here. Last year the leadership was simply natural gas, oil, fertilizer and copper.

This year we have tech, banks and oil, which is a much better troika, in part because there are innate valuation parameters to all three vs. the earnings to be reported. These are not "run ahead" situations, with the possible exception of oil. I say possible because I feel strongly that there is some innate demand for oil, just not up here.

So, while there is certainly cause for some panic as the trade unwinds, remember that there are other forces at work this time, notably the mutual funds, which are getting money in and putting it to work as the market comes down.

At the time of publication, Cramer had no positions in stocks mentioned.

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Know What You Own: In Tuesday's trading, the most active stocks include Bank of America (BAC - commentary - Trade Now), the S&P Depositary Receipts (SPY - commentary - Trade Now), the Financial Bull 3X (FAS - commentary - Trade Now), the Financial Bear 3X (FAZ - commentary - Trade Now), Citigroup (C - commentary - Trade Now),Microsoft (MSFT - commentary - Trade Now) and the Financial Select SPDR (XLF - commentary - Trade Now).

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Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

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