A bear statue will be in front of the Frankfurt Stock Exchange of Deutsche Börse AG in Frankfurt on Friday, March 13, 2020.
Alex Kraus | Bloomberg | Getty Images
CNBC’s Jim Cramer advised investors Tuesday to watch the market’s volatility as stocks could potentially see more downside moves.
The CBOE Volatility Index, or VIX, is showing signs that current conditions may last through June, he said.
“The charts, as interpreted by Mark Sebastian, suggest the next month and a half could be a pretty tough time for the stock market.”Bad money“said the host.” You may think we’re out of the woods, but the fear indicator says otherwise. “
Sebastian, who founded OptionPit.com and contributes to RealMoney.com, is Cramer’s trusted volatility expert. Compare movements in the S&P 500 and VIX, known as the fear measure, Sebastian has planned a scenario where market tests hit last week’s lows, Cramer said.
The S&P 500 closed at 4,127.83 on Tuesday, up nearly 2% from a decline last Wednesday.
S&P and VIX tend to run in opposite directions. After “normal” behavior in the first quarter, when stock prices were trending higher while the VIX was generally trending lower, the tide appears to be changing, Cramer said.
Since mid-April, the VIX has risen almost 30% from its low. The S&P 500 has fallen nearly 0.5% over the same period.
“A flat market with a rising VIX is exactly what you see at the beginning of what is called a volatility threshold,” said Cramer. “According to Sebastian, at this point the VIX is rising for an extended period of time, typically 2 to 6 weeks, and the market is in a real correction.”