Jim Cramer explains why a
Jim Cramer explains why a technical eye is crucial to getting ahead of professional money managers.
CNBC’s Jim Cramer may not be a chartist, but he understands why charts are so important for predicting the market’s major moves.
“You must consider them as if they are footprints at the scene of a crime,” the “Mad Money” host said. “These footprints trace out what big money managers might be doing with their buying and selling of stocks.”
Cramer cares about charts because there’s a remarkable, self-fulfilling nature of charting stocks. Some of the best investment ideas can come from chart-inspired brainstorming sessions, he said.
But for Cramer, the best way to produce results is by carefully analyzing both a stock’s fundamentals and its technicals for more comprehensive results.
A good technical analysis means being able to find the indicators that will help to determine the overall direction of the market, especially since so many stocks are influenced by S&P 500 stock futures.
Sometimes, technicians start by comparing the chart of an individual company to the chart of an average to determine the legitimacy of a move, a tactic known as confirmation.
For instance, if the Dow Jones Industrial Average hits a new high, historically, it is not sustainable unless the Dow Jones Transportation Average also hits a high, confirming the breakout status of the Dow itself.
If both the industrials and the transports hit new highs, Cramer feels more secure blessing the move as legitimate.
Other indicators that Cramer watches are the banking index, the housing index, the semiconductor index and the ETF that encompasses large retailers.
“I like to see all of these indexes move up in sync before I truly bless a market move,” the “Mad Money” host said. “You get all of these indexes rolling higher, and you have to put the maximum amount of chips on the table.”
The inverse is also true. If there’s a move up without confirmation from a majority of the indexes, then the whole rally could be fake and shouldn’t be trusted. Cramer saw this occur right before the 2008 financial crisis when there was no participation from the financials, retail or tech.
The “Mad Money” host also considers stock advances and declines, which can indicate whether a rally is too concentrated. He likes to see a market with good participation from many different groups.
Additionally, Cramer looks at the new-high-to-new-low ratio, since stocks that make the new-high list are worth watching. It’s not easy to get on the list, so any company hitting new highs must be doing exceptionally well, be part of a strong sector and be privy to strong geopolitical forces pushing it higher, he said.
“You may not be a technician, but you need to know what the charts are saying and you need to know how to read the internals to verify a real move or a phony one,” Cramer argued.
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Some US stocks are entering the final bull stage of the hyperwave, called phase 4. When it goes parabolic before a multiyear/decade of retrace. Phase 4, in stocks can take years maybe even a decade...who knows. However, it ends always with a huge blow off top.
Thanks Cramer! Great Vid!
Only chart you need to know is the one of the FED's balance sheet
Wish he speaks clearly
all the charts are saying that the rally is phony though. THEY'RE ALL PARABOLIC
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What are you going to do when we end capitalism
Great Explanation. I thought Hedge Funds would always be on top.
More of Brooke please ?
Label the Axis or explain the meaning of the axis in the video. Basic stuff for a video series presenting charts...
Is a bear market on the
Is a bear market on the horizon? WSJ markets reporter Riva Gold analyzes the trends that came before the dot-com bubble burst and the financial crisis hit.
Need to get some clothes on these bare markets.
Fastest way to go broke - taking financial advice from these colonial idiots.
America's homeless problem solved! Repakage US homeless citizens as domestic migrants. Move them from one state to another and call it a humanitarian crisis. First it was illegal aliens then undocumented workers now migrant caravans. The same thing but repackaging for same end goal. We do the same too get homeless Americans off the streets. The invitation to upgrade your lifestyle by any means necessary by illegal breaking and entry thru backdoors, IS, all, media, politicians, actors and globalists, messaging and instigation. Pretty much an open invitation to do so at their homes. They are saying it is okay and extending invitation, license for citizens of other countries to do so.
Hi uninformed YouTube commenter, we can't tell when the next bear market event will happen so why don't you take a crack at it? After all, it's not like we hire a whole team of people to sort through this data anyway.....
Right. I thought I'm the only one who noticed that.