Cramer's 'Mad Money' Recap: Spotting Tops and Bottoms

Finally, the last sign of an impending top is government action, he said. The government, at the federal or the state level, can do more to hurt a company than any competitor.

To spot this kind of a top, Cramer advised people to check out the front pages of The New York Times, The Wall Street Journal, USA Today and The Washington Post. And "don't just stick to the business section, because it never pays enough attention to Washington," he said.

Also, spotting a sector rotation, "when money moves from one sector or group of sectors into another because of the business cycle, is of the utmost importance" if you want to make money in the market, Cramer added.

There are two kinds of companies: cyclical businesses, which tend to do well when the economy is growing fast and not so well when the economy is slowing down, and secular stocks, which tend not to be sensitive to the underlying strength or weakness of the economy, he said.

At the top of the cycle, before you think a downturn is coming, it's good to load up on your secular stocks. At the bottom, it's better to swap out of all of that for some "beaten up" cyclicals, Cramer said.

Now, the "holy grail" of Wall Street is "figuring out when and how a company's earnings are going to change before anybody else does," he said. "It's hard to do, and it is time consuming, but, man, does it pay off."

There are two ways to spot changes in earnings, Cramer said. One way is to "start from the bottom." For example, with retail, people can go to stores, watch the register and count the transactions.

"You've got to do this at more than one store and at more than one time," he said. "When something is flying off the shelves at a pace that isn't reflected by the earnings estimates, buy the stock of whoever makes it."

However, in the case that investors don't have the time to do that kind of homework, they can try to anticipate spending cycles, Cramer said.

For example, "the airlines have an incredibly predictable spending cycle," he said. "When you see that Boeing is getting a lot of orders, you need to buy the stocks of Boeing's suppliers, the Fairchild, the BE Aerospace, the Honeywell. As soon as the analysts start loving these stocks, you get out."

"You watch the indicators, you stay disciplined, the rest of the market will follow you; and that's the situation you want to be in," Cramer said. "The lead dog might feel lonely, but he's got the best view."