Graphics warn actions must be removed, says Jim Cramer

Jim Cramer, of CNBC, said Tuesday that two market measures indicated that stocks had gone too high and too fast.

By comparing the stocks of the S & P 500 and VIX indices – the CBOE volatility index that measures investor sentiment – there is reason to wait before adding more securities to a portfolio, according to one of the colleagues of RealMoney.com, the host of "Mad Money".

Carmer said: "The graphics, as interpreted by Mark Sebastian, suggest that we are about to step back a bit."

He attributed to Sebastian, founder of the trading company Option Pit Trading, a forecast for late April that the market would be sold temporarily. The VIX, often dubbed the "fear gauge," indicated that investors were then "still scared", which preceded a month of "very ugly and restless" transactions in May, the presenter noted.

"And given [Sebastian’s] Recent experience reading the volatility index, I have to take it seriously. Cramer said, "He did not say that, but he says we're going to have turbulence."

The S & P 500 over the last five trading days has increased by 5%. The VIX index initially dropped by almost 19 points, which Cramer called "textbook schooling action". However, the measure of volatility has oscillated between 15 and 16 points since Thursday's session, as the S & P index continued to climb.

According to Cramer, a rise in the VIX on the S & P 500 and the stabilization of the VIX is a kind of situation that worries Sebastian, because the two indices should be reversed. Any other movement indicates that something is wrong.

"In the past two years, almost every time the VIX and S & P have come together, the markets have quickly experienced some kind of mbadive selloff," said the host. "The most notable took place in January of last year," as shown in the long-term chart below.

Sebastian, Cramer explained, does not expect the market to fall as dramatically as in January 2018. Nevertheless, there is every reason to remain cautious.

"This action tells Sebastian that the fun may be over, at least for the moment," said Cramer. "The volatility index that refuses to go much lower is a problem, which means that you have to be careful when the averages are recovering, such as [they did] this morning, because these gains could be canceled. "

Sebastian suggests that the S & P 500 should retreat for a few days, creating buying opportunities. Then the market may have a "slower, more logical and methodical rally," Cramer said. Until the

The host warns that chasing after stocks after a big run is a dangerous business. A few days after the major averages posted their best weekly performance in 2019, Wall Street saw the market finish in the red.

Until the market recedes, Sebastian "thinks that the VIX will stay above 16 and that the stock market is going to chop in. I agree with him," Cramer said.