CNBC’s Jim Cramer said Wednesday he sees signs that the headline market may be poised to retreat from its highs, but a trusted volatility expert suggests otherwise.
“The charts, as interpreted by Mark Sebastian, suggest who the S&P 500 is in head higher . and the negative trends I have indicated out in top of the show – at least one bit’ of they – they shouldn’t lead to something too scary,” said the “Mad Money” host.
Sebastian, the founder of OptionPit.com and Cramer’s colleague at RealMoney.com, concluded plotting moves in the S&P 500 and the Cboe Volatility Index (VIX), also known as the market, is the “indicator of fear.”
The VIX on Tuesday jumped to just under 18 in intraday trading before pulling back at 4:44 pm. Meanwhile, the S&P 500 fell nearly 1% at noon Tuesday before scratching back most of its losses at close. The S&P 500 posted a cool record on Wednesday, while the VIX lost ground.
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The VIX and the market generally run in opposite directions. When stocks climb, the fear indicator tends to decrease. However, when the two indices go in the same direction, it suggests that a decline in stock prices is on The horizon.
“If you are concerned that the VIX is direct higher and therefore the market is inevitably [headed lower], Sebastian says, ‘hold your horses,’ “Cramer said.” Sebastian points out that the volatility index was in a huge downtrend, with lows and highs getting lower as the stock market roared.”
“Yesterday showed us that the VIX can give us a quick, violent move higher when the market sells off, so there is a bit of fear in ambush, but that fear vanishes when the actions go up,” said Cramer. “For now, Sebastian says that’s what really matters.”
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