CNBC’s Jim Cramer on Tuesday warned investors that the market’s volatility will likely continue as its recent run loses steam.
“The charts, as interpreted by Jessica Inskip, suggest that the broader market might be in for a bumpy ride as we exit bear market rally mode,” he said.
Stocks fell on Tuesday, continuing the previous session’s losses on worries the Federal Reserve will tip the economy into a recession next year, despite Chair Jerome Powell’s comments last week that the bank could start slowing down its pace of interest rate hikes this month.
Cramer said that Inskip, who predicted last month that the market’s recent run could last through mid-December, sees signs of trouble. To explain her analysis, he examined the daily chart of the S&P 500.
Inskip believes the market’s gains from mid-October through the end of last week was a bear market rally — in other words, a temporary bounce in a larger downward trend, he said.
He also reminded investors that the market is at the mercy of the Fed’s interest rate increases, and the central bank’s inflation strategy is beholden to the labor market.
When November’s hotter-than-expected labor report was released on Dec. 2, the S&P failed to jump two key ceilings of resistance.
“Inskip thinks we went right back into bear market mode,” Cramer said. “The S&P can still escape from this new trajectory, but she won’t have much confidence in a bounce unless we blow through last Friday’s levels.”
For more analysis, watch Cramer’s full explanation below.
(With inputs from CNBC)