Technical analysis from veteran chartist Ralph Vince indicates the stock market should be able to maintain a short-term uptrend, CNBC’s Jim Cramer said Tuesday.
“The charts, as interpreted by…Ralph Vince, suggest this market may continue to drift over the next several months as long as employment remains strong,” the ‘Mad Money’ host said before warning “Please don’t be too complacent as there are signs that all is not well as we enter the final third of the year.”
One reason for Vince’s current outlook is his model focused on continuing unemployment claims, which are part of the Department of Labor’s weekly employment reports. Cramer said the tech looks at this jobs data to get insight into the health of the economy and, by extension, whether it makes sense to invest in the S&P 500. Strong labor markets are correlated to rising stock markets, Cramer said, while recessions tend to be bad news.
Technical analysis Ralph Vince has a model that uses continuing UI claims to identify risky and risky periods for the S&P 500.
Crazy Money with Jim Cramer
“Right now, Vince says the continuing claims data remains in bullish mode. While we’re very worried about a Fed-mandated recession, we have an incredibly strong labor market here,” Cramer said. “This is good news for the economy as a whole, although it makes the Fed more likely to raise rates aggressively in the future. But this stubbornly resilient labor market is also offsetting some of the damage caused by these rate hikes.”
“Of course, employment is not the ultimate solution,” warned Cramer. “You also need to keep an eye on earnings and dividends and the overall market valuation.
For more analysis on these factors, watch the full video of Cramer’s explanation below.