Cramer's 'Mad Money' Recap: Can Corn, Harvest Profits

Margins of Error

Everyone is talking about the Consumer Price Index that was released Wednesday, but Cramer believes people need to forget about it.

"If you are in stocks, there is one thing you need to think about," he said, "your fellow shareholders."

There are two things that would move any stock and they are buyers and sellers. Market players need to know who their buddies are. They need to know who is going to buy and who is going to sell.

As long as people know who their fellow shareholders are, they know where they stand in the market, Cramer said.

"I don't believe we are out of the woods yet," he said. "There are a lot of bears out there."

It's hard to be bullish in times like these. Hope needs to be crushed. It is not a part of the equation. The market is still full of bad shareholders. That means people need to stay defensive, he said, adding that he would still stick with the supermarkets stocks.

What defines a bad investor is anyone who borrows money to buy stocks, Cramer said. It's called buying on margin.

"The single most important indicator of the market is how much margin debt there is in the market," he said.

When there is a high level of margin debt, it is bad. And when there is a low amount, that is good and players should buy.

For stock prices to increase, people cannot be borrowing money to buy them, Cramer said. Artificial demand is not a good thing. These types of shareholders are your enemies, they are out to get you, he said.

Right now, not only has there been a lot of margin debt, but it has been increasing. Increasing margin debt is a very bad sign.

These types of shareholders are considered bad because people who buy on margin don't have much discretion as to when they have to sell their stock.

Also, since stocks are going down, margin players might not be able to put out the collateral, he said. If people can't pay, brokers reclaim their stocks. Massive selling equals a bad market.

Right now the margin debt in the NYSE is $50 billion higher than it was in 2005. The numbers don't lie.

"These numbers are discouraging for people who think we are near a bottom," Cramer said. "You need to watch this number like a hawk."

In a debt-ridden market such as this, you have to be defensive, not aggressive, until this number goes down. Cramer advised his viewers that if any of them own stocks on margin, they should get out.