Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
"This, too, shall pass," Jim Cramer told his Mad Money viewers Friday after another big down day on Wall Street. But until then, keep your powder dry, your head clear and sell your weakest stocks into any strength.
Cramer said the market's selloff isn't as rapid or onerous as it appears. Stocks have actually been in decline for a while now, but much of that weakness was masked by a few high-flying companies. Now it's clear for all to see that the market wants to go lower, and even good news doesn't matter.
While Cramer was able to check off a few items on his "must have before we rally" checklist Thursday, all of those checkmarks disappeared today. The Chinese market slid, oil prices plummeted, earnings evaporated and the Federal Reserve let its governors talk publicly about raising interest rates again.
With all of those headwinds, it's no wonder the markets plunged at the open. That's why Cramer wants viewers to sit tight and wait.
Off the Charts
In a Friday edition of his "Off The Charts" segment, Cramer went head to head with colleague Marc Sebastian over the chart of CBOE Volatility Index, better known by it's ticker symbol, the "VIX," to see when this selloff might finally come to an end.
Sebastian first compared a chart of the S&P 500 versus the VIX going back to August, noting that back then the selloff was bigger, faster and scarier, with the VIX spiking into the mid-50s. Following the initial spike, the VIX then remained high for weeks.
But Sebastian also noted the current run-up in the VIX isn't close to the mid-50s, but closer to the small spike we saw in mid-December. The fear seems to be ramping up slowly and steadily as the S&P falls.
That indicated to Sebastian, and Cramer, that the markets still have lower to go before a bottom is found. There will likely be no quick V-shaped bottom either, given how slowly things are winding down.
Here's Next Week's Game Plan
Investors should expect another tough week next week, Cramer told viewers, but that doesn't mean there aren't a few gems in his game plan.
On Monday, Cramer told viewers, keep a close eye on the economic data coming from China. The data are not likely to be good.
Then, on Tuesday, Cramer said he'll be watching Morgan Stanley (MS) and Bank of America (BAC) , along with Delta Airlines (DAL) , IBM (IBM) and Netflix (NFLX) . Cramer said the negatives aren't baked into Morgan and any good news at Bank of America, an Action Alerts PLUS holding, won't matter to the markets. Unless Delta has a blowout quarter, he said, investors can count on more pain. Likewise with IBM and Netflix, where Cramer also expects more selling.
On Thursday, however, some rays of hope. Cramer said he's bullish on Travelers (TRV) and Verizon (VZ) but not Union Pacific (UNP) , American Express (AXP) or Schlumberger (SLB) , all of which will be reporting.
Watch for Mergers
Even in a market as bad as this one, there are still opportunities out there, Cramer told viewers. Case in point: mergers and spinoffs.
Cramer said when Baxter International (BAX) spun off its drug division last year as Baxalta (BXLT) it was a big win for shareholders. In fact, the day after Baxalta began trading on its own, the company was in talks to be acquired.
Where does Cramer see the next merger opportunities coming from? He suggested Coca-Cola (KO) should buy WhiteWave Foods (WWAV) , another AAP holding, to give itself relevance in the natural and organic space. He also suggested that American Express should buy PayPal (PYPL) , also an AAP holding, to make itself relevant again in the online payment space.
Cramer said he's confident both Coke and American Express need to do something bold.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer said that 2016 will mark the return to recession if the Fed continues on its path of planned interest rate hikes. That's why it's so important for Fed Chair Janet Yellen to rein in the parade of Fed governors who continue talking publicly about their rate hike plans.
Sure, our market is concerned over China and oil. But make no mistake, the market's weakness is a direct result of investors having to fight the Fed with the current rate hike while planning ahead for what could be four additional hikes.
Cramer said it doesn't matter the current rate remains historically low, rising rates affect liquidity in the markets and that is what matters.
To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.
To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.