CNBC’s Jim Cramer said Wednesday that investors can expect it to run smoothly as Wall Street tries to move past a brief but tumultuous period of stock declines.
After the market recouped all losses from Monday’s big slump, Cramer checked the chart action to predict the next move.
“The charts, interpreted by Carolyn Boroden, suggest that the S&P 500 it’s ready to be slammed, with more on top, “the”Bad money“said the host.” I share Boroden’s positive attitude towards the market in general … especially now that the recent market shakeout has ripped so many weak hands out of the market. “
In her analysis, Boroden, known for Fibonacci trading strategies, discovered a recurrence pattern when the S&P 500 experiences a steep sell-off within three days.
In the three days that ended Monday, the index fell nearly 3%. A similar multi-day route took place in mid-June, twice in May, and once in March and January, noted Cramer.
“Very often this year the S&P will pull back pretty hard, but it will only be three trading days from the last new high,” he said. “Boroden is pretty confident that this pattern has already been repeated.”
“If we had been down yesterday it would have been a different story, but we returned. To them, that means the meltdown is probably over,” he said.
Boroden, who contributes to RealMoney.com along with Cramer, keeps an eye on 4,359 in the S&P 500. Should the index break this resistance line, its next target will be 4,437 and 4,492, Cramer said.
However, investors could expect further turmoil if the S&P 500 breaks the above pattern and falls from a new high in more than four trading days.
“In that case, she would be much more concerned about the possibility of a major downward correction. But at the moment that hasn’t happened and the future looks bright, which is in line with what we saw in winning season. “Said Kramer.