CNBC’s Jim Cramer said on Wednesday that the benchmark S&P 500 is at a crossroads and poised to either fall further or roar higher.
“The charts interpreted by Jessica Inskip suggest that we are all in a very important moment where the S&P 500 has found an equilibrium between the support floor and a resistance ceiling. At this point, something has to give way,” he said.
Stocks tumbled on Wednesday after new December retail sales data renewed fears of a recession. Investors also took gains from earlier this month, spurred by weak economic data that suggested the Federal Reserve is winning its battle against inflation.
The S&P 500 fell to its lowest level in about a month, while the Nasdaq broke a seven-day winning streak.
To explain the analysis by Inskip, OptionsPlay’s director of product and education, Cramer examined the daily chart of the S&P 500, which dates back to November 2021.
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The chart shows that earnings season is often a time 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 the market’s upper limit of resistance since the Federal Reserve’s fight against inflation began in November 2021, according to Cramer.
Inskip notes that the cap has never been breached even after strong rallies over the past two gain cycles, he added.
But while the last two earnings seasons started at levels near the bottom of its close, the S&P 500 started the current earnings season just below the ceiling in the fourth quarter, Cramer said.
“Good [earnings] Numbers could give us more upside than we’ve seen in the last few quarters, but bad numbers could mean the S&P falls right back to the bottom of the range.” he said.
For more analysis, see Cramer’s full statement below.
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