S&P 500 charts predict—time to raise cash!
One day the is up, the next day it's down. What a roller coaster ride! Jim Cramer has had enough of the volatility, and thought this would be a good time to circle back to one of "Mad Money's" guru technicians to find out what could be in store for investors ahead.
That is why Cramer went off the charts and spoke with Carolyn Boroden, a technician who runs FibonacciQueen.com and is one of Cramer's colleagues at RealMoney.com.
Cramer frequently turns to Boroden when a Fibonacci analysis needs to be done. This is a type of analysis based on medieval godfather of mathematics, Leonardo Fibonacci. He discovered that a key series of ratios tend to repeat themselves in nature. Those same ratios tend to also show up in key levels of the stock market, and Boroden applies the ratios based on past security swings to figure out if an index is likely to change trajectory.
"It would be hocus pocus if it didn't work so many darned times, certainly more than a lot of strategists who are often swayed by emotion," the "Mad Money" host said.
Approximately one year ago, Cramer spoke with Boroden about where the S&P could be headed. At the time the index was trading at 1,885, and Boroden said she could see the S&P ultimately make its way up to 2,138. Back then, Cramer thought this was an aggressive call. Fast forward to today, and the S&P is about 50 points away. Wowzer!
Now that we have almost reached her outrageously bullish target in the S&P, where could it be headed next?
Looking at the charts, Boroden thinks it is time to become cautious. Her main concern is driven by the fact that the chart shows the same pattern in the S&P that she saw recently in the Russell 2000 before it had its nasty breakdown.
Right before the Russell 2000 broke down last week, it reached the very important level of 161.8 percent extension of its previous swing. Boroden has found that when a security reaches one of these key levels after a big run, it becomes vulnerable to correction. That is exactly what happened with the Russell 2000.
Additionally, the S&P 500 is now not far from Boroden's upside target of 2,138, which represents a 161.8 percent extension of the S&P's previous swing.
But that's not all.
What concerns Boroden the most, is that she sees a solid ceiling of resistance in the 2,117 to 2,141 range. That is only about 2 percent from where it is trading now.
"Now, let me be clear: Boroden is not joining the doom and gloom camp. She's not saying you should go out and short the S&P futures," Cramer said.
What Boroden is saying to investors, is that this impending pullback could create an opportunity to take profits for some of your holdings. However if there is a significant pullback, she also thinks this could be a great buying opportunity.
----------------------------------------------------------
Read more from Mad Money with Jim Cramer
Cramer Remix: All my years, never this!
Cramer: Best places to put new money
Cramer: Two streams of money pouring into market
----------------------------------------------------------
So while a correction could be in the cards of the S&P 500, Boroden does not predict it to be a vicious one. However, it is time to approach the market with caution.
"I say, going into an uncertain earnings period, it never hurts to raise a little cash, certainly less cautionary than Boroden, but I'm not taking the other side of the trade, either," Cramer added.
Questions for Cramer?
Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram - Vine
Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com