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Jim Cramer teaches investors how to use charts to detect a phony rally on Wall Street

10 122 views | 18 Jan. 2020

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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Crypto BR

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.

j loos

Thanks Cramer! Great Vid!

Bob Smith

Only chart you need to know is the one of the FED's balance sheet

happy

Wish he speaks clearly

John Chang

all the charts are saying that the rally is phony though. THEY'RE ALL PARABOLIC

Bagpuss Macfarlan

Idiot

Eddy Winata

Watching football tomorrow. Gonna do this now.
28 companies reported 12.57 Billion (4.7%) Q4 Revenue growth, $4.61 (10.65%) EPS growth, 2.2 billion net income decline (-5%) compared to same QTR last year. Buy back saves EPS.
Fiscal '18 vs '19, those companies reported 45.7 Billion (4.5%) Revenue growth, -$17.97 (-9.92%) EPS decline, and 13 Billion net income decline (-7%). Declines are dominated by WBA, GS, Constellation, Wells Fargo, Schlumberger. Apparently buy back cannot save the whole fiscal performance.
https://docs.google.com/spreadsheets/d/1zm4o3FZL70JMqgVck8yhu9xawaZWzfKgwTa3VEYRJGc/edit?usp=sharing

j loos

Great review, stone cold!

Darth Revan

Cramer looks strange today

Esoteric Trader

Lots of stocks and ETFs forming a BLOW OFF top. IWM still week. There's your sign

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What's happening with Wall Street bonuses this year | Charts That Count

4 825 views | 21 Nov. 2019

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djjlc

What are you going to do when we end capitalism

K A

Great Explanation. I thought Hedge Funds would always be on top.

Dhrit

More of Brooke please ?

Gordon Canning

Label the Axis or explain the meaning of the axis in the video. Basic stuff for a video series presenting charts...

Jean-Philippe Deschênes

75gf456g85h5689756f6332513

HaoJun See

What does the y axis stand for?

Sapio Sexual

FT u cant have such a gorgeous women talking about financial data expecting your audience to real use their cognitive ability to understand it.

B S

I love her

Jonathan Hewett

Love this series. Thanks

I wonder if political pressure has anything to do with the decreasing banker bonuses?

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Bear Necessities: The Charts That Predict Market Downturns

34 985 views | 21 Nov. 2018

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.

Leonard McGriddle

Need to get some clothes on these bare markets.

FunnyMan PJ

Fastest way to go broke - taking financial advice from these colonial idiots.

Hybrid InfoDesk

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.

Akua Walters

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.....

william d

Right. I thought I'm the only one who noticed that.

Clownish-Gambino

A Negative Yield curve?

moderatesunited

Those charts may as well be chicken end trails. Charts mean nothing. Timing the market will make you go broke.

Dollar cost averaging. Always buy and you'll hit the highs and the lows. Charts are for dummies.

duduoba

Everyone keep talking about the economy, here's a question; there are more than 12billion ants surprising fact; they got no economy.

MyNegativeCreep

Inside traders don't need any indicators.

Raghav garg

Don't fall for these videos ... Actually these contribute big fat 0 to your decision making ..

Will Wilson

Next Bear Market = 2024.

Morpheus

Not like david stockman wasn't wright, even if he is a cockservative.

Paper Tiger

pathetic

Abhishek Pandey

Next Bull market in India will be in April 2019.....

mluu510

Self full filling prophecy

ХОРОШО

The Winter is coming.

Blackpilled Saint

Is now a good time to buy stocks?

E G

Surprised that the shiller ratio wasn't mentioned her. That and the "Buffet indicator"

RAIDER NATION!!

It sounds like only god knows, and of course the illuminati

James Ryan

Yeah, so stop blaming Trump. Thats the nature of the stock market - daily up and down. DUH!

M K

wow...not to say something completely unrelated to the contents but the girl looks like a young Kelly Clarkson. Gosh I don't follow pop culture or even American Idol contestants hahaha but just couldn't help and state the obvious. Ok now back to the fundamentals Riva talks about lol

S M

umm... I think its supposed to be 'bare necessities'...as in bare minimal.

Joaquin JBS

I'd add market cap to GDP and corporate debt to GDP and keep an eye on the monetary policy. Having said that, nobody knows... During odd periods you can find great investments as well, no matter what macroeconomic charts tell you.

Geoffrey Mureithi

The dollar is collapsing soon.

Guan-Han Chiu

Exquisite video! Thank you WSJ and @GOLDRIVA

Crypto buzz

The best and main indicator is actually Interest rate. When interest rate are Low , ppl buy assets and when high ppl save money.

Anony mous

I wonder how the information age / the internet penetration rate changes the predictive power of such indicators. I mean, 16 year old stock market beginners can watch this easily consumable video and act accordingly. Could this make the time lag of these leading indicators shorter or even non existent?

Tansher Singh

the next bear market is here..

Online Support

Blah blah, looking at the past to predict the future is useless, too many variables. Sure, when you go back in time you can find all kinds of patterns but it doesn’t means same pattern applies again. Best predictable
Of stock market has been the rice production levels in Bangladesh so far.. as I said you keep looking, you will find a random pattern to correlate it with. Other than over optimistic market, the rest is BS. Your own chart is all over the place.

Sheesh

Is there a brushed up version of this? The global m&a chart looks nominal and doesn't account for the relative shrinking of the importance of the American economy. AAII sentiment is a joke; gap between T bill yield would possibly benefit from adjustment to interest rates/volatility. Libor OIS definitely missing. When jobless claims start to jump, deleverage, go for cons staples/futures/cash.

Lee Voon Yow

Thankyou WSJ FOR anaylist to me , i was 47 yrs old{still young in USA but an old man in MALAYSIA} , in my life ,i regonazed every 10 yrs will be having a bear market , Next time it will be happen in the middle year , depending my anaylist the economic war between CHINA & USA , If EURO country help either one of them , the victory giving to USA+EURO or CHINA+EURO , but neither who won , bear market will be coming soon after the economic war . i hope anyone can understanding to my poor english , THANKYOU . SAY NO WAR .

SHKLEE YT

1st

boros Ouro

It’s an ads for AAII ?

Goodtimes4100

Gotta get me some spy 200p

gr8 b8

Anyone else kind of turned on by the host?

Little Townie

Thank you. that was informative.

Katysweets C.A.

whether the market goes up or down or sideways, real investors know that, having a portfolio manager will save you all this heart ache. i mean those guys triple people's investments in barely 4 months!

soulmate

I like bear. Their chubby, fuzzy and huggable. Lol