CNBC’s Jim Cramer said on Wednesday that the benchmark S&P 500 index is at a crossroads, about to fall further or roar higher.
“The charts, as interpreted by Jessica Inskip, suggest that we are all at a very important moment where the S&P 500 has found a balance between the support floor and a resistance ceiling. At this point, something has to give” , did he declare. said.
Stocks fell on Wednesday after new December retail sales data reignited fears of a recession. Investors also took profits on early month gains, boosted by soft economic data suggesting the Federal Reserve is winning its fight against inflation.
The S&P 500 fell to its lowest level in about a month, while the Nasdaq snapped a seven-day winning streak.
To explain the analysis from Inskip, who is the director of product and education at OptionsPlay, Cramer looked at the daily chart of the S&P 500 from November 2021.
The chart shows that the earnings season is often a period of volatility marked by sharp rises and falls. It also shows that the S&P 500 has been in a downtrend for over a year, with the downtrend line acting as a ceiling of resistance for the market since the Federal Reserve began its inflation battle in November 2021. according to Cramer.
Inskip notes that the ceiling has never been breached, even after the powerful rallies of the last two earnings cycles, he added.
But while the past two earnings seasons have started with the index at levels near the bottom of its late trading, the current fourth-quarter earnings season has seen the S&P 500 start just below the cap, said To screw up.
“Good [earnings] the numbers could give us more upside than what we’ve seen in recent quarters, but bad numbers could mean the S&P is heading straight back down the range.” he said.
For more analysis, watch Cramer’s full explanation below.