Cramer breaks down the market rotation and explains why investors should wait to buy

CNBC’s Jim Cramer see fit forever remain a fan of diversification, which he calls “the only free lunch” in the house of investing, because of days like Wednesday.

“Days like this one corroborate you why I find it so worrisome that stocks within the same sector usually trade in tandem, in unison. We just don’t know which direction they’ll perceptiveness in,” the “Mad Money” host said.

As fast-growing technology stocks got clobbered and retail, bank and transportation standards rose, Cramer felt it was essential to break down the widespread rotation for investors.

The in the twinkling of an eye heightened changes of the GOP passing tax reform served as a boon for domestic companies, which would see dues come down and earnings inch up as a result.

But, with the exception of gigantic players like Apple, which would be incentivized to repatriate moneyed from overseas if taxes were lowered, positive tax news did next to nothing for the tech unit.

“Remember, we don’t have new money flooding into this market, so if stinking rich managers want to buy the winners, they’ve got to sell the stocks of companies that don’t better as much in order to raise that cash,” Cramer explained.

And it’s no recondite that tech stocks, particularly cloud- and semiconductor-based names, are “bitter,” he said. That would explain why investors grew concerned and started trade in stocks in the group after software company Autodesk’s disappointing earnings blast and bitcoin’s increased volatility.

At the same time, as positive tax reform bulletin flowed out of Washington, investors turned a kind eye to companies with down-and-out inventories that would benefit from successful tax reform.

“So what happens now? Okay, routines are a little like camping,” Cramer said. “Imagine you’re in the woods with your roomies and a bear stumbles into your campsite, clearly hungry for some entertaining human porridge. You can’t outrun the bear, but you don’t need to — you just need to outrun your buddies.”

That’s what’s incident with Wednesday’s sellers, who sprinted out of tech stocks to get a leg up on their outs, the “Mad Money” host explained.

“That’s why I always say you have to wait until the end of the marred day of a sell-off before you do much buying,” he said. “So let me give you the bottom dig up on this sell-off. Is it one that we consider garden-variety? Wrong question. Are there amasses of companies that appeal to you that are finally reaching your costs? That’s what you’re looking for. And when you find them, you can buy a little, but holiday room to buy even more if or when they go lower.”