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Major averages’ charts suggest stocks aren’t out of the woods

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The stock market is “not out of the woods” despite Tuesday’s positive trading session, CNBC’s Jim Cramer and technician Bob Lang warned investors as stocks pared their monthly losses.

Lang, the founder of ExplosiveOptions.net, author of “Know Your Options” and part of the Trifecta Stocks newsletter team at TheStreet.com, said that the charts of several major averages are signaling more pain ahead.

“Lang believes that it’s too soon to start picking at this market,” Cramer said on “Mad Money.” “In fact, he says buying here would be like trying to catch a falling knife.”

Lang began with the weekly chart of the S&P 500. The index has already erased its gains for 2018, but Lang said two key indicators are signaling that it could still go lower: the 50-week moving average and the moving average convergence-divergence line, or MACD, which helps technicians anticipate changes in a stock’s path before they happen.

“The darned thing just made its first weekly close below the 50-week moving average … since early 2016 and this is something that really spooks chart-watchers,” Cramer said.

Worse, the MACD made a bearish crossover this month, telling Lang the S&P could still trade lower. And his theory was only confirmed when he looked at the S&P’s monthly chart.

“[The] first thing that jumps out at us is that we really haven’t come down that far from the highs. Lang points out that this will be the S&P’s first down month since March,” Cramer said. “How low can we go? Lang thinks that the S&P could potentially fall to 2,300. That would be down 14 percent from these levels [and] could take several months.”

The Nasdaq 100, which tracks the 100 biggest non-financial stocks in the Nasdaq Composite, has also fallen below its 50-week moving average based on its weekly chart.

But between its weekly and monthly charts, Lang said several measures of buying and selling pressure indicated that the index was more overbought than oversold, meaning there could still be weakness ahead.

“Lang says the momentum here is weak and the volume has been rising, suggesting that there’s more pain to come,” Cramer noted.

The Russell 2000, which tracks small-cap stocks, is “clearly the worst of the major indices,” the “Mad Money” host said. Like the others, it has traded below its 50-week moving average, and the Russell’s MACD indicator hasn’t recovered since it “rolled over” in September, Cramer said.

“Lang points out that the volume here has been rising with heavy selling, meaning big institutional money managers are dumping these small-cap stocks,” he said. “Lang wouldn’t be surprised if it heads all the way down to its 50-month moving average. That’s down about 10 percent from here.”

All in all, while the declines will stop eventually, Lang’s analysis and the charts are telling Cramer that the stock market isn’t there yet.

“Bottom line? The charts of the major indices, as interpreted by Bob Lang, suggest we’re not out of the woods,” Cramer said. “Lang thinks we could have a lot more downside. I think it’s OK to pick here myself. I like that some real down-and-outers rallied today. I also think we’re way too oversold to get hammered here, at least for now, but I respect Bob’s opinion and you need to know that there has been substantial technical damage that’s been done to this market, and after this respite, it might not be done going down.”



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Stocks

Retail earnings reports, China trade impact

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CNBC’s Jim Cramer on Friday said he expects more of the same in the week ahead of stock trading.

“Next week, once again, is all about trade and retail,” the “Mad Money” host said. “This is the week when most retailers report, so we will be listening closely to what they say about the trade war.”

Monday: Trade watch

The stock market will confront the same issues on Monday as the week prior. The days following will see a lot of retailers hold conference calls, and Cramer is looking to see what they have to say about tariffs on Chinese imports.

“The market will punish companies that source in China and reward companies that don’t, because that’s what [President Donald Trump] is doing,” he said.

Tuesday: Home Depot, TJX, Nordstrom

Home Depot: The home improvement retail giant reports earnings before the bell. Cramer is expecting weather to weigh on earnings again.

“There’s much too much rain this gardening season, and I bet that hurt them,” he said. “I still believe Home Depot can tell a decent story about trade, but it won’t matter if gardening season, their equivalent of Christmas, turns out to be a bit of a bust.”

TJX: The T.J. Maxx parent delivers its quarterly results to shareholders in the morning.

Nordstrom: The luxury department chain has an earnings call at the end of trading. The stock is down more than 20% this year and more than 27% in the past 12 months.

“At these levels, it pays you a 4% yield. I think it may be too cheap to ignore,” Cramer said.

Wednesday: Lowe’s, Target

Lowe’s: Lowe’s, the main rival to Home Depot, presents its quarterly earnings before the market opens. CEO Marvin Ellison is guiding the home rehab chain through a turnaround.

“Wall Street loves Ellison, though,” Cramer said. “If Lowe’s gets hit, either before or after the quarter, I’d be a buyer of the stock.”

Target: Target comes out with its latest results before trading begins. The stock is about $20 per share off its September high and has a 3.6% yield.

“I know it’s battling both Walmart and Amazon, which might be too much competition for any one company, ” Cramer said. “But I think CEO Brian Cornell’s doing a terrific job. You know what, I like the stock here.”

Thursday: Best Buy, Splunk

Best Buy: The tech gadget store reports earnings in the morning. The stock is up 30% this year, and Cramer is warning not to take a chance on it at current levels.

“I’m betting they’re going to have to talk about tariffs on the whole darned conference call,” he said.

Splunk: The software analytics company, one of Cramer’s “Cloud King” stocks, presents its financial report after the market closes. Cramer expects Splunk to put up a good conference call out of CEO Doug Merritt. He said Merritt continues to deliver on promises.

“I like it a lot. … [It’s got] no China exposure — I say buy,” he said.

Friday: Foot Locker

Foot Locker: The shoe retailer will lay out its quarterly report for investors before stocks start trading. With a presence in shopping centers across the country, Foot Locker carries Nike, Adidas, Under Armour and a range of other sports apparel brands in its stores.

“The stock’s been held back by trade war worries,” Cramer said. “I bet it will prove to be immune, or at least more immune than most people think.”

WATCH: Cramer breaks down the week ahead in earnings

Disclosure: Cramer’s charitable trust owns shares of Amazon.com and Home Depot.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

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Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com



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Charts suggest markets could soon get a deep correction

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CNBC’s Jim Cramer said Thursday that his colleague is warning that danger could be on the horizon for the stock market.

The “Mad Money” host took a look at chart analysis as interpreted by technician Carolyn Borogen, Cramer’s coworker at RealMoney.com who also runs FibonnacciQueen.com, to understand what could come of this volatile market.

The major U.S. averages were taken for a ride this week as investors attempted to gauge whether the United States would raise existing tariffs on imports from China on Friday. Because of this uncertainty, the best way to get an empirical reading of the market is through studying chart action, Cramer said.

The high-to-high cycles, as explained by Boroden, in the weekly chart of the S&P 500 is cause for concern, the host said.

Highs on the index have ranged between 31 weeks and 36 weeks, and the most recent peak was recorded last Friday, he said. Prior to that, the last major high was set in September, which preceded the stock sell-off in October.

Markets tend to repeat themselves, and because stocks sold off this week after a big run, Boroden thinks there could be cause for concern.

“In fact, she’s looked at a series of previous high-to-high cycles, and what she’s noticed is that there’s a whole confluence of them coming due this month,” Cramer said. “That’s why she’s throwing up a caution flag, because Boroden thinks we might finally get a deep downside correction — even deeper than what we’ve already experienced during hell week.”

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These 6 stocks could make or break the S&P 500’s run

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Call them the Supersized Six.

Microsoft, Amazon, Apple, Alphabet, Facebook and Berkshire Hathaway — six of the most highly valued companies in the S&P 500 — don’t just boast the index’s biggest market caps.

In fact, those six companies are worth about as much as the bottom 290 companies in the S&P combined. Taken together, their market caps total $4.2 trillion, while the bottom 290 S&P companies are worth roughly $4.3 trillion.

It’s fairly common knowledge that the top 50 S&P stocks are worth more than the bottom 450, and it’s not unusual that the market is frequently this “top-heavy,” says Carter Worth, chief market technician at Cornerstone Macro.

But the concentration in these six names is noteworthy, and it could mean trouble for the market, Worth said Tuesday on CNBC’s “Fast Money.”

Considering the influence they have over the S&P’s direction, it makes you wonder: “Is it an index, or is it a few big names that drive everything?” Worth said. “That’s what makes beating the index so hard.”

He called attention to this chart tracking the six-stock basket against its 150-day moving average, as well as the number of times it has traded above or below that average.

“Literally, every single time we have gotten this far above the 150-day moving average, we have peaked. It is right at that level yet again,” Worth said, pointing to the uptick in the bottom panel’s trend line. “So, as this goes, so goes the market. I think you’ve got a crowding that’s not so good. Just to put it in real context, think of those six names relative to the S&P. It’s all so dependent on these big names.”

Moreover, while the market’s “heavy hitters” have made up 15% of the S&P’s total market cap, on average, since at least the 1990s, that percentage is also ticking up, Worth noted.

“We’re starting to get back to a level that is typically indicative of when markets peak. That’s ’07, so forth and so on,” he said. “None of this is particularly healthy.”

By market cap, Microsoft is worth about $963 billion, Amazon is worth $949 billion, Apple is worth $969 billion, Facebook is worth $540 billion, and Berkshire Hathaway is worth $515 billion.

The broader market mounted a recovery Wednesday, with the S&P lifting off its Tuesday lows early in the session.



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