Jim Cramer of CNBC advised investors on Monday to stay on course after the stock market rebounded one session after recovering from a weekly loss.
The S&P 500, weighed down by inflation, fell 3% during the two-week period, but the “Mad Money” guest took a look from the volatility chart – also known as the VIX or the alarm machine – in an attempt to make a plot steering stock can go next.
“Don’t let the fear of inflation last week free you,” he said. “The records, according to Mark [Sebastian], suggesting that the panic is over and that the market is starting to move. “
Cramer reviewed card analysis by Sebastian, a technologist who launched the trading education company OptionPit.com and contributed to RealMoney.com, in the CBOE Movement Index.
According to Sebastian ‘s study, Monday’ s version reveals what happened after similar spikes observed in the VIX in June, November, and January. In the weeks following these spikes, the VIX doubled numbers and the S&P 500 rallied higher.
If the VIX had been rising alongside the S&P 500 on Monday, a warning would have been needed, Cramer added, because that is usually a bearish sign.
“A VIX spike is what happens when the fear makes a hard move out of nowhere and then delivers almost as fast. It represents a moment of panic that you have to buy. , because it breeds quickly, “Cramer said. “That’s why Sebastian is confident that the VIX spike needs to be treated as a buying opportunity.”
The volatility and benchmark indices usually trade in other directions – when the S&P 500 rises, the VIX would fall and vice versa. As stocks sold last week, the stockpile accumulated nearly 27%, the biggest rise in about a month, to just under 28.
If recent VIX spikes in memory are any indication, the S&P 500 could be on its way to new heights, Cramer said. The VIX on Monday fell about 16% as the S&P 500 advanced 2.38% to close above 3,100.
Inflation of the VIX, as opposed to the VIX spike, when the index rises for several weeks to the market side, is a sign that there is potential sales in the works, he said.
“When you see them going the same way, it means the market is almost right to course. In an VIX outburst, the stock market will eventually go down, which will spiking volatility index even higher, “he said. “If you want stocks to go higher, then spike VIX [is] good news. “