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Investors looking for the keys to what's driving the market higher should stop looking at stocks, Jim Cramer told the viewers of his "Mad Money" TV show Wednesday.

"Watch the credit markets, watch bonds and watch housing," he said, "That's why we rallied."

Cramer said that while most investors may be focused on poor corporate earnings, rising unemployment or even weakness in Europe as a sign that the markets are going lower, the real market indicators are not in stocks.

Cramer said that in the global scheme of investing, stocks are a minor league team when compared to the major leagues of the credit markets, commercial paper markets and the bond markets.

He said the current crisis was started by the housing and credit markets, and it will be those markets that will be the first indicators of a turnaround.

And that turnaround is starting to happen, said Cramer, with a rise in new issues of convertible bonds, hedge funds starting to line up for auto loan backed bonds, and the Federal Reserve pumping in money any place it's needed to thaw the once frozen credit markets.

Cramer said what's good for the credit markets will be good for stocks in three to six months, and that's why the markets continue to rise, despite the bad news of the day.

Supermarket Rivals

Not all supermarkets are created equal. That's why Cramer pitted traditional grocer Kroger ( KR) against it's premium rival, Whole Foods ( WFMI), to find out which way the markets think these stocks are heading.


Cramer said the tale of Kroger and Whole Foods couldn't be more different. Kroger's been doing everything right, taking market share, increasing margins and keeping prices low to compete with the likes of Wal-Mart ( WMT).

Whole Foods, on the other hand, has been in decline for years, said Cramer. The company's same store sales have been decelerating since 2004 and since 2006 the stock has been acting like a classic momentum stock that's lost its mojo.

However in recent weeks, shares of Kroger have been on the decline, while Whole Foods has rallied sharply. Cramer said this could be from macro market forces, with investors leaving the safety of recession-resistant Kroger in favor of the high flying Whole Foods, or it could signal that Whole Foods is finally turning around.

Cramer said he thinks the markets were moving these two stocks. He said he'd be inclined to take profits in Whole Foods and pick up some beaten down Kroger shares, but added that he'll let the viewers decide for themselves which one is right for them.

Am I Diversified?

Cramer played "Am I Diversified" with callers to see if their portfolios have what it takes. The first caller's portfolio included Altria ( MO), ConEd ( ED), ExxonMobil ( XOM), Unilever ( UN) and Verizon ( VZ).

Cramer said this portfolio had "unbelievable diversification."

The second caller's top holdings included Coca-Cola ( KO), Apple ( AAPL), Costco ( COST), Chevron ( CVX) and Wells Fargo ( WFC).

Cramer said this caller knew knows to play the game right.

The third caller had Chevron ( CVX), Wal-Mart ( WMT), Johnson & Johnson ( JNJ), Xilinx ( XLNX) and United Technologies ( UTX) as their top five stocks.

He said this portfolio is diversified.

The fourth caller's stock picks were Home Depot ( HD), Southwest Energy ( SWN), STMicroelectronics ( STM), Direxion Financial Bull 3X Shares ( FAS) and Yahoo! ( YHOO) as their top five stocks.

Cramer said this portfolio was also diversified.

Mad Mail

Cramer told a viewer that Honeywell's ( HON - Get Report) goodwill account on their balance sheet does make evaluating the company difficult, but he still likes the stock.

Lightning Round

In the Lightning Round, Cramer was bullish on Myriad Genetics ( MYGN - Get Report), US Bancorp ( USB - Get Report), Bank of New York Mellon ( BK), State Street ( STT - Get Report), FirstMerit ( FMER), ArcSight ( ARST), Oracle ( ORCL), Terra Nitrogen ( TNH), United Parcel Service ( UPS)and Johnson & Johnson ( JNJ).

He was bearish on Trimble Navigation ( TRMB - Get Report), Garmin ( GRMN - Get Report), Wyeth ( WYE), UAL Corp ( UAUA), SunPower ( SPWRA)and Pfizer ( PFE).

Check out the latest edition of "Cramer's Take onHeadline Stocks" on Stockpickr.

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

Read more of Cramer's Mad Money Lightning Round insights.

For "Mad Money" performance statistics and other links, check out Mad Money stats

At the time of publication, Cramer was long Altria, Unilever, Johnson & Johnson, Chevron, Wells Fargo and Wal-Mart.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for, Inc., and CNBC, and a director and co-founder of All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or is related to the specific opinions expressed by him on "Mad Money."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.