Charts show ‘too early’ for market recovery

CNBC’s Jim Cramer warned investors on Friday that the stock market is unlikely to recover any time soon.

“The charts, as interpreted by Mark Sebastian…suggest that this market has more downsides and it’s too early to get really bullish,” he said.

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“Unlike him, I also believe that we could have a sharp spike, but for our charitable foundation, if that happens, we will have to sell some,” he added.

The S&P 500 closed its worst month since March 2020 on Friday. The Dow Jones Industrial Average fell 8.8% for the month, while the Nasdaq Composite fell 10.5%.

Before going into Sebastian’s analysis, Cramer first explained that when the S&P 500 falls, the CBOE volatility index, also known as the VIX or fear indicator, usually moves up. And when the S&P moves up, the VIX usually goes down.

He then studied a couple of charts showing the daily performance of the S&P and VIX:

While the S&P and VIX moved at the same pace in June, the situation reversed in August. Sebastian notes that when the S&P began to fall in late August, according to Kramer, the VIX had a “slow rally” rather than a roar as it usually does.

This disparity in the movements of the S&P and the VIX persisted until early September, but only really spiked this week, Cramer said, adding that the market is far from recovering.

“Sebastian is waiting for the S&P to fall while the VIX also falls – a classic sign that a sell-off is coming to an end,” he said. “That’s not happening right now.”

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

Watch Jim Cramer Break Down Mark Sebastian's Fresh Technical Analysis

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