June 30, 2022

The charts indicate that it is not yet time to cash in on all the stocks

The charts indicate that it is not yet time to cash in on all the stocks

Investors should be more patient before getting into everything in the volatile stock market, CNBC Jim Cramer He said Monday, summarizing the latest takeaway from technical analyst Mark Sebastian.

Sebastian looked at the trajectory of the VIX Index, the so-called Wall Street Fear Scale, and the S&P 500 in order to help understand the increased volatility during Ongoing Russian-Ukrainian conflict.

“He thinks it will be more of a pain, but if you have some money on the sidelines, there will come a point when you want to start running it,” said Cramer, founder of OptionPit.com.

“In the meantime, he’s anticipating more excited days like last week when we exploded higher, or today when the market went straight back down and then went up again.” “mad money” The host said after Monday’s mixed session.

The VIX, which measures the implied volatility of the S&P 500 options, and the S&P 500 should head in opposite directions. Cramer said that in order to get more confident, Sebastian wants to see stocks hit a new low in the near term while the VIX doesn’t make a new high in the near term.

Here’s how to trade the S&P 500 and VIX so far in 2022.

Year-to-date moves for the S&P 500 and VIX.

Mad Money with Jim Cramer

“When the VIX and S&P diverge, it tells you that the trend is about to change. This will be the moment [Sebastian] He says he jumps with both feet… Like October 1990,” Kramer said, referring to a time when the stock market plunged to the bottom during the tensions associated with what became known as the Gulf War.

The chart below shows this difference in 1990.

VIX and S&P 500 from July 1990 to June 1991.

Mad Money with Jim Cramer

However, for now, Cramer said Sebastian doesn’t think the market has reached that point yet. Instead, the technician sees VIX futures in a tailspin, which to him is further evidence that the market is “stressed” and therefore “more bad things can happen,” Kramer explained.

A pullback, a relatively uncommon event, occurs when near-term VIX futures are more expensive than those seen later in the year.

The chart below shows the VIX futures contracts for each month through November.

VIX futures have entered a state of default, when short-term contracts are more expensive than those that will see later in the year.

Mad Money with Jim Cramer

“You have to strengthen yourself to get through this period, so you can be pushy when it’s time to start buying, and that moment will come,” Kramer said.

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