Cramer also recruited technician Rob Moreno, the publisher of RightViewTrading.com and Cramer’s colleague at RealMoney.com, to get a better read on how investors should be looking at long-term interest rates — the ones the Fed doesn’t really control.
“This market has three camps, three groups of money managers with very different worldviews,” Cramer said.
In the first camp are investors who believe the Fed is doing the right thing by raising interest rates in lockstep, which will ultimately cause an economic slowdown and send long-term rates lower.
The second camp is made up of “inflationistas” who think inflation is raging, long-term rates are too low and the Fed isn’t doing enough, Cramer said. The third camp houses people who think rates have already peaked and are going to go lower.
So, Cramer and Moreno laid out a plan for investors to take advantage of all three camps’ views. By looking at past moves in the 20-year U.S. Treasury, Moreno found the general trends stock groups tend to follow when long-term rates move up, down or stay the same.
“Here’s the bottom line: the charts … suggest that you want to buy the soft goods stocks like Philip Morris if bond yields go lower and you want to buy the banks like Citi if they go higher, and you might even consider owning a homebuilder if they simply stabilize right here,” Cramer concluded.
To watch the full “Off the Charts” segment, click here.