Charts recommend the S&P 500 is nearing a ‘decisive’ second, Cramer says
CNBC’s Jim Cramer on Monday mentioned the benchmark S&P 500 might be at a pivotal second this week.
“The charts, as interpreted by Mark Sebastian, recommend that we’re approaching a decisive second right here. If the S&P 500 can keep away from a serious decline this week, he is feeling optimistic concerning the future — alternatively, if it will get clobbered, he sees a heck of much more draw back,” Cramer mentioned.
The S&P fell 1.3% to 4,017.77 on Monday forward of a packed week of earnings and a possible rate of interest enhance from the Federal Reserve.
To elucidate evaluation from Sebastian, who’s the founding father of buying and selling training firm Possibility Pit, Cramer examined the day by day chart of the S&P 500 going again to final January.
Sebastian notes that the S&P 500 hasn’t been capable of break via its ceiling of resistance since a yr in the past regardless of a number of rallies final yr, till Jan. 23 of this yr, based on Cramer. The benchmark index has since stayed above the extent for six consecutive buying and selling classes, he added.
He additionally in contrast the chart of the S&P over the past month to that of the CBOE Volatility Index, or the VIX, Wall Road’s concern gauge, to clarify why the breakout is critical.
Whereas the VIX and the S&P usually transfer in reverse instructions, they’ve each moved up since Jan. 13, based on Cramer.
“When these two traces transfer in the identical route, it often means you may’t belief the motion on this, within the S&P … as a result of whereas the market’s rising, the concern is rising, too,” he mentioned.
Cramer added that Sebastian expects the market to see a retest of the brand new ground of help on the 200-day transferring common.
“If that ground does not maintain, he would not be stunned to see the S&P plunging to a brand new low round 3,400,” he mentioned, including, “That is assuming one thing goes very incorrect this week, perhaps a a lot harsher than anticipated [Fed] assembly.”
For extra evaluation, watch Cramer’s full clarification beneath.
