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.”