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Cramer's charts reveal Trump's inauguration could trigger a market reversal

As the Dow Jones industrial average continues to linger around 20,000, Jim Cramer turned to the charts to find out if the rally can continue.

To find out if the rally can keep rolling, he spoke with Carolyn Boroden, a technician who runs FibonacciQueen.com and is a colleague of Cramer's at RealMoney.com.

Looking at the tools that most technicians use, one might think that the charts are bullish right now. But Boroden uses a different methodology, and it made her become more cautious about the Dow and the S&P 500.

"She is not saying that the Trump rally is definitely coming to an end, but she does think that, at the very least, the market could be approaching an important decision point," the "Mad Money" host said.







"I say nobody ever got hurt taking a profit, especially going into what could be a pretty tumultuous earnings season." -Jim Cramer

Boroden looks at past swings of a given stock or index and then filters them through Fibonacci ratios. These are a series of numbers discovered by medieval mathematician Leonardo Fibonacci, who found that certain numbers repeat over and over again in nature. The same patterns are found in snail shells, flowers and the stock market.

Time cycles found in the weekly chart of the Dow industrials caused Boroden to worry that the recent rally could be running out of steam. Whenever she sees several time cycles coming together at the same time that could mean there is a reversal in sight.

Boroden spotted eight different Fibonacci time cycles in the Dow, with seven of them coming due next week, and one coming due this week.

Not surprisingly, they coincide with Donald Trump's inauguration.

This kind of a setup usually leads to a market reversal, approximately 65 to 70 percent of the time, Boroden said. Nevertheless, the time cycles can cause a move to accelerate. Meaning, the Dow could pick up speed rather than reverse. But Boroden says the probability suggests the rally will take a breather.

Boroden also saw resistance to the rally right above the Dow's 20,000 target, with the ceiling hitting 20,193 to 20,098. So, even if the index does hit 20k, the charts suggest there is a chance stocks could run out of steam. She saw the same for the S&P, with a ceiling of 2,223.

While Boroden was not trying to call a top in the Dow and says she is not predicting a crash, she does think it is time to get more cautious and take some profits.

"I say nobody ever got hurt taking a profit, especially going into what could be a pretty tumultuous earnings season," Cramer said.

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