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Cramer: Oil prices are taking too much control over the stock market's moves

CNBC logo CNBC 1/23/2019 Elizabeth Gurdus
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It "infuriates" CNBC's Jim Cramer to watch hedge funds take control of the stock market by making decisions based on a single variable: the price of oil .

Oil prices, which are "almost entirely hostage to the trade talks with China," declined on Wednesday, reflecting the notion that "no news is bad news," Cramer said on "Mad Money."

But after the Dow Jones Industrial Average surged in the first hour of trading on some strong earnings reports , the fact that oil's morning reversal was able to drag the Dow and the S&P 500 lower rattled the longtime stock-picker.

"This is a rough environment for individual investors who prefer to own stocks, not rent them, because the hedge funds are in control," Cramer explained, adding that the morning's "breathtaking" decline was linked solely to the price of crude.

"This kind of action infuriates [me]," he said. "First off, 90 percent of the companies in the S&P 500 actually benefit from lower oil — their stocks should be going up, not down, when the price of crude drops. [...] It makes a mockery of everything investing is supposed to be about."

Read more from Jim Cramer and other top money experts

This obsession with oil prices can cause such dramatic market swings that it discourages regular, individual investors from buying stocks, the "Mad Money" host warned.

"But don't despair. Longer term, these day-to-day gyrations don't matter. Longer term, stocks behave a lot more rationally," he said. "Cheaper oil helps everything from freight costs to plastic discretionary consumption. Most companies are going to be winners from lower oil prices, and their stocks will be winners, too."

Shorter term, though, no single investor can muster the buying power to beat the hedge funds, Cramer said. Instead, he suggested battling them "over the long haul," where these near-term investment firms are "at their weakest."

"You can afford to take your time and pick at the stocks of high-quality companies that deliver amazing results," like the four "standout" earnings reports Wednesday morning from IBM, Procter & Gamble, United Technologies and Comcast, he said.

Shares of all four companies have "more room to run" based on their quarterly results, which indicated strategic focus, organic growth, and encouraging prospects for innovation, he added.

"Bottom line? On a moment-to-moment basis, this market may be controlled by traders who only seem to care about the price of oil — it's why we sold off this morning [and] it's why we bounced later in the day," Cramer concluded. "But, over the long haul, the earnings of individual companies do actually matter, which is why what we heard from IBM, from Procter & Gamble, United Technologies and Comcast was so encouraging for the future of these great American companies."

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com. Additionally, Cramer's charitable trust owns shares of Comcast.

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