Skip to main content

After working in the financial world for two decades, Jim Cramer said on his

"RealMoney" radio show Monday that he has learned that stocks have the ability to foreshadow sector downtrends.

For example, when homebuilding stocks first began to slide, there were no "For Sale" signs anywhere, Cramer said. In fact, there wasn't any sort of sign that there was anything bad in the housing market.

When Bob Toll, the chairman and CEO of

Toll Brothers

(TOL) - Get Toll Brothers, Inc. Report

appeared as a guest on Cramer's "Mad Money" TV show months ago, he said that Cramer didn't know homebuilding.

Cramer agreed that he doesn't know homebuilding, but said one thing he does know is stocks. And eventually as the homebuilding stocks kept going down, "For Sale" signs sprung up.

Now "these stocks have bottomed and are not going down anymore," Cramer said. "The stocks will turn ahead and the

homebuilding business will follow -- the way it always works."

Although the actual commodity of housing has not bottomed, the stocks have, he said. Similarly, Cramer believes that the underlying asset, oil, is going to go 20% from its high, because the stocks have gone 20% below their high.

"When it goes there, we will take a look at the group, but not until then," he said.

Although it's good to have a positive attitude, sometimes too much optimism can cost you, Cramer went on.

TheStreet Recommends

"The oil stocks are down 19% in a straight line," he said. "There are always people who say the worst must be over and believe they should get in as the stocks are too low."

But investors should not hold these stocks through a rally, because the commodity of oil is not going higher, Cramer stressed.

"Don't be fooled by the 'oil is bottoming call,'" he said.

Instead, take opportunity in a lift to cash out, and take a longer-term view and recognize that oil commodity and stocks will bottom in the next six to nine months, Cramer said.

"If you have more than 10% of your portfolio in oil, you need to lighten up," he advised.

To see the most recent edition of The RealMoney Radio Recap in its entirety, please click here. This recap is published every day around 3 p.m. ET.

Jim Cramer is a director and co-founder of He contributes daily market commentary for's sites and serves as an adviser to the company's CEO. Outside contributing columnists for and, 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. Listen to Cramer's RealMoney Radio show on your computer; just click

here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click

here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click

here to get his second book, "You Got Screwed!" and click

here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by

clicking here. has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from