CNBC’s Jim Kramer said Wednesday that the market will sink again by Monday and will rely on the analysis of Mark Sebastian, founder of Options Pitt and volatility expert.
“The charts explained by Mark Sebastian say we are currently in the middle of a short-term volatility spike, and once that is over, we will return to the post-March low environment where stocks could easily go higher.” “Mad Money” host said.
Kramer first explained the relationship between the S&P 500 and the CBOE volatility index, also known as the measure of fear.
“Because volatility reflects indicative fears, it’s normal for it and the S&P to go in the opposite direction,” Kramer said Wednesday. “As soon as they move in the same direction, you have to ask questions about the stability of the market.”
The Dow Jones Industrial Average fell 0.42% on Wednesday, while the S&P 500 fell 0.97%. Nasdaq Composite is down 2.22%.
In early 2022, the S&P declined as the VIX moved almost straight up, Cramer said, adding that the VIX could not break its previous low even after the S&P temporarily moved up.
“From there, the volatility index was off the run. Although S&P recovered in the last week of January, it rolled again in February. More importantly, from Sebastian’s point of view, the fact that VIX confirmed this negativity. , Just as it should be, “Kramer said.
In contrast, Sebastian noted that on March 14, the S&P reached incredibly close to its previous lows since March 8, but the VIX reached much lower levels on the 14th than on the 8th, Kramer said. He added that this means investors are less afraid.
Kramer said that while examining what the charts show about the market recently, Sebastian believes that “there is more room to run higher.” Kramer explains how recent movements in the S&P 500’s and VIX support Sebastian’s point.
“On March 29, the S&P 500 had a recent high of 4,631. At that point, the VIX closed at 18.90. Although the S&P failed to touch that same level on Monday, note that the VIX hit a low there.… This is the level. The hit was 18.57 In other words, the market went down, but the VIX also went down, “Kramer said.
“This means that despite the action being taken today, the fear is diminishing,” he added.
Sebastian believes the market will rally again by Monday, although S&P is unlikely to reach incredibly high new levels, Kramer said.
“In his view, we’re in the middle of a two- to three-day VIX spike.… This kind of move is going to be incredibly fast, but short-lived,” Kramer said. “She is OK [the S&P] 4,700 again, probably before Easter. “
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