CNBC’s Jim Cramer said on Tuesday there could be a “key moment” for investors to buy into the S&P 500 this week, based on analysis by DeCarley Trading market strategist Carley Garner.
Garner thinks there is a “moderate chance” of a rebound later this week, but the more likely scenario is to either see some stability around where the S&P 500 is currently trading or a breakout. to 3,500, the “Mad Money” host said.
“At this point, however, she would like you to be a buyer, not a seller, because the bears will eventually run out of firepower and some of the money left on the sidelines will come back into the market,” he said. he adds. “It’s a bullish scenario, people.”
The S&P 500 slipped deeper into bear market territory on Tuesday as it fell for the fifth day. The Dow Jones Industrial Average saw a slight decline, while the Nasdaq Composite rose slightly.
“Even if the present is awful, stocks tend to bottom out when the fundamentals are at their worst because the averages don’t reflect the present, they reflect what we expect in the future, say six to twelve months from now.” , Cramer said.
To begin his explanation of Garner’s analysis, Cramer took a look at the daily chart of the S&P 500 June futures contract:
Garner thinks the S&P 500 could be oversold and could be ready for a rebound, according to Cramer.
The relative strength indicator at the bottom of the chart, an important momentum indicator, is near 30. This shows that prices are oversold. Coupled with the RSI and S&P 500 diverging, sellers are starting to tire, Cramer said.
Garner also thinks the recent dismal index of consumer sentiment from the University of Michigan suggests the S&P 500 is close to bottoming, according to Cramer.
If the S&P 500 makes a “miraculous” recovery above 4,030 – a key support floor around 300 points above its current level – the current drop could be attributed to a “downside trap” that will push the S&P around 4,400. But without the rally, the index could dip to its next low of support around 3,550, Cramer said.
“But, and that’s a really big but, if we get a drop to 3,500, she thinks that would be a buying opportunity. Of course, she could be wrong,” Cramer said.
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