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Cramer reverses himself... Again. I know, Shocking! After telling his viewers as recently as Friday to raise cash and take profits, Cramer reversed himself on Tuesday night’s Mad Money, stating: "I can't hate this market as much as I did 24 hours ago”. Cramer said Wednesday's market plunge is changing the game and is creating more opportunities to buy rather than sell. Okay, so let me get this straight. The big plunge that the Great One was warning his viewers about amounted to a 2% pullback off the recent S&P high? Even for Cramer, the audacity of this reversal is quite something.

On the bright side, it makes me feel better about my feeling that the markets are still facing severe headwinds in the next six months and the potential for a significant selloff is great. European debt contagion is not getting any better, and if Spain cannot skirt a bailout the potential for a major market meltdown looms large. Rising commodity prices are a significant threat and I am afraid the inflation genie has been let out of the bottle by a reckless Fed. Some of this pressure will be reduced by the end of QE2, but that might only be a temporary reprieve and interest rates are surely going up. The necessary but turbulent fight over reducing government spending is likely to jolt the market at various times as that battle ebbs and flows. In addition, the budget situation in most of the states is dire, there will be a significant reduction in Japan’s growth rate due to the tragedies there, and the increasing turmoil in the Middle East-- just to name a few other concerns.

In this environment, I continue to recommend using strength to raise some cash to take advantage of better entry points in the near future. Avoid high beta, high P/E stocks that have had a large run up since QE2 was announced. With the withdrawal of that excess liquidity, stocks like Netflix (NASDAQ:NFLX), Lululemon (NASDAQ:LULU), and Salesforce.com (NYSE:CRM) are likely to be hit hard and are to be avoided. Keep a good portion of your portfolio in large cap, low P/E blue chip stocks that have underperformed the market and with significant revenues from faster growing international markets. Equities like Microsoft (NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC), Exxon (NYSE:XOM) and Telefonica (NYSE:TEF) are good companies to take a look at. Given Cramer’s schizophrenic behavior I would like to re-highlight three good picks in the pharmaceutical sector:

Abbott Labs (NYSE:ABT) is a well diversified health care product company. It is selling at 11 times this year’s earnings and 10 times next year’s earnings. It yields a generous 3.8%. It has a large stable of patent protected drugs, has a solid research and development history, and has had success in acquiring companies to fill out its portfolio.

Novartis (NYSE:NVS) is an international leader in pharmaceuticals, generic drugs as well as consumer and animal health products. It is selling at a little over 10 times this year’s earnings and little under 10 time earnings expected in 2012. It yields a solid 3.6% and the company has raised its dividend over 150% over the last five years. It has a very diversified portfolio of products that mitigates the risk of any one event (EX, product recall) from providing too much of a negative shock.

Pfizer (NYSE:PFE) is reaping some good synergies, cost savings, and product diversification from its merger with Wyeth. It has consistently beat earnings estimates over the past several quarters and consensus earnings estimates for both this year and next have risen over the last ninety days. It is in a good position to weather the patent expiration of Lipitor and sells at nine times earnings and yields almost 4%.

Be careful out there.

Disclosure: I am long MSFT, JNJ, INTC, XOM, ABT.

Source: Cramer's Reversal Reconfirms the Need for Cash and Undervalued Blue Chips