Charts show S&P 500 nearing ‘decisive’ moment, Kramer says

CNBC’s Jim Cramer said on Monday that the S&P 500 benchmark could be a game-changer this week.

“The charts, as interpreted by Mark Sebastian, suggest that we are approaching a pivotal moment. If the S&P 500 can avoid a major decline this week, it is optimistic about the future – on the other hand, if it gets broken, it sees a lot more downsides,” Cramer said.

The S&P fell 1.3% to 4,017.77 on Monday ahead of a busy earnings week and a potential Fed rate hike.

To explain the analysis of Sebastian, founder of the trading education company Option Pit, Cramer studied the S&P 500 daily chart from last January.

Sebastian notes that the S&P 500 could not break the resistance ceiling from last year, despite numerous rallies last year, until January 23 this year, according to Cramer. He added that since then, the benchmark index has remained above that level for six consecutive trading sessions.

He also compared the last month’s S&P chart to the CBOE Volatility Index or VIX, Wall Street’s fear indicator, to explain why the breakout is significant.

While the VIX and S&P tend to move in opposite directions, Kramer said they have both risen since Jan. 13.

“When these two lines move in the same direction, it usually means you can’t trust the S&P’s actions…because as the market goes up, so does the fear,” he said.

Cramer added that Sebastian expects the market to see a retest of a new support level at the 200-day moving average.

“If this level doesn’t hold, he won’t be surprised to see the S&P crash to a new low around 3400,” he said, adding: “That suggests something goes wrong this week, maybe much more drastically.” than expected. [Fed] meeting.”

For a more detailed analysis, see Cramer’s full explanation below.