Jim Cramer breaks down how an S&P 500 climb could be followed by a 'truly savage sell-off'

• "The recent sell-off could be a sign that this bull's getting long in the tooth," CNBC's Jim Cramer said, citing research from technical analyst Carley Garner.
• "Garner's betting that the S&P 500 can give you one last gasp higher from here, followed by a truly savage sell-off," the "Mad Money" host said.
• "I don't know if she's right, but that would be pretty par for the course for the historically hideous month of September," he said.

Investors may want to approach the market with caution, despite the three-day sell-off that hit Wall Street, according to analysis from a trusted source of Jim Cramer.

Carley Garner, technical analyst and co-founder of DeCarley Trading, is forecasting that more volatility could be on the horizon over the coming months.

"The recent sell-off could be a sign that this bull's getting long in the tooth," Cramer said Wednesday on CNBC's "Mad Money." "Garner's betting that the S&P 500 can give you one last gasp higher from here, followed by a truly savage sell-off."

The month of September is historically a bumpy month for stocks, and the election season may contribute to more uncertainty in the investment community. While there could be more upside in the S&P 500 after a roughly 2% pullback in the index, Garner sees a bumpy road ahead.

"I don't know if she's right, but that would be pretty par for the course for the historically hideous month of September," Cramer said.

Looking at a monthly chart tracking the S&P 500 and Nasdaq-100, the indexes have rallied hard, "even factoring in their suboptimal performance over the past week," he said.

From the beginning of July, the benchmark had rallied more than 15% to its peak close last Wednesday. The Nasdaq-100, which is composed of about 100 of the largest and most actively traded stocks in the tech-heavy Nasdaq Composite, had rallied 21% in that same time frame.

Because of the big gains in the indexes, Garner gets the impression that the market is dominated by momentum, Cramer added. If the S&P 500 can hold above a floor of support near 3,280 — another 3.5% decline from Wednesday's close — the index has the potential to catch up to the Nasdaq-100's gains in the short-run with a ceiling of resistance at 3,660 and another at 3,700, the host said.

Garner's longer-term outlook is a different story. As the Nasdaq 100 made new highs, Garner points out that the relative strength indicator momentum indicator, or RSI, failed to make a new high, leaving the index vulnerable to a correction.

As for the S&P 500, the RSI peaked at 72 when the index peaked in February. The same indicator registered a 67 last week when the index topped out near 3,590 last Wednesday.

That's a sign of froth for Garner.

"When the averages start making new highs, but this crucial momentum indicator can't seem to break out, that's a warning sign," Cramer said. "It makes [Garner] wonder if we're simply pulling forward gains that we'll have to spend months digesting, like we did in 2018 and 2019."

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