Investors can afford to be “cautiously optimistic” at this point in the stock market’s cycle, CNBC’s Jim Cramer said Tuesday after consulting with chartist Rob Moreno.
Moreno, the technician behind RightViewTrading.com and Cramer’s colleague at RealMoney.com, sees a convoluted path ahead for stocks. After calling the December bottom, Moreno noticed that the Nasdaq Composite’s late-2018 decline was about a 24 percent drop from peak to trough.
That’s important because, in a bull market, stocks tend to see “periods of consolidation — pauses in a long-term bull run,” Cramer explained. “To [Moreno], the decline here looks very similar to what we saw from the Nasdaq in 2011, 2015 [and] 2016,” three consolidation periods of recent past.
If he’s right, that could be bad news for the bulls, who may have to wait at least seven months for stocks to break out of their consolidation pattern, during which they tend to trade in a tight range, Cramer warned. But Moreno still sees some opportunity for investors.
“If you believe his thesis about the market — that we’re in a consolidation period, one that will last until September — then you can afford to be … cautiously optimistic right now,” Cramer said on “Mad Money.”
Part of Moreno’s confidence came from his analysis of the S&P 500’s daily chart, which also included the support and resistance levels from its weekly and monthly charts.
Even after a 16 percent rally from its December lows, Moreno saw more room to run for the S&P based on its Relative Strength Index, or RSI, a technical tool that measures price momentum. The RSI, he explained, hasn’t yet signaled that the S&P is overbought, and the Chaikin Money Flow, which tracks buying and selling pressure, shows big money pouring in.
“Moreno thinks that these new buyers