Charts suggest the Nasdaq 100 and S&P 500 could be days away from bottoming, says Jim Cramer

Legendary chartist Tom DeMark thinks major U.S. stock indexes could be days away from bottoming, CNBC’s Jim Cramer said on Wednesday.

“We’ll be in even more pain before we get there,” Cramer warned, as he broke down DeMark and his team’s analysis focusing on the S&P 500 and Invesco QQQ Trust, a popular ETF that tracks the Nasdaq. -100 focused on technology. . The S&P 500 and Nasdaq-100 both posted strong gains on Wednesday, posting their first consecutive positive sessions since late February.

“What we’re looking at right now could be a premature buy,” the ‘Mad Money’ host suggested. “When the shorts are out, DeMark says it often creates a downside vacuum – a big move down once the shorts have covered their positions and there’s no more forced buying,” said he added.

According to Cramer, DeMark uses a 13-session countdown model that tells him when a rally or decline is likely to change direction, or in other words, hit a high or low. DeMark’s methodology calls for a bottom when the countdown hits 13, Cramer added.

Cramer said DeMark spotted patterns in the S&P 500 and the ETF that tracks the Nasdaq-100, suggesting both are days away from hitting lows.

Here’s a look at the QQQ since September, including the two trend exhaustion 13s at the end of last year.

The Nasdaq-100 is on the buy 10 countdown, so it needs three successive lows to potentially reach a bottom.

Now, Cramer noted that DeMark finds the Nasdaq-100 is in the middle of a buy 10 countdown.

“That means we need three days of successively lower lows, with lower closes, before the decline is really exhausted,” Cramer said. “In other words, DeMark expects one last leg lower before the tech weakness runs out of steam.”

DeMark is seeing a similar trend across the S&P 500. Here’s a look at DeMark’s analysis of the benchmark US stock index since September.

The S&P 500 is also currently at 10 countdown, which means it needs three days of successively lower lows to eventually reach a bottom.

The S&P is also at 10 on DeMark’s buy countdown, Cramer explained. “Again, that means we need three days in a row with lower lows and also lower closes before the sell-off runs out,” he said.

Put the two pieces of analysis together, and DeMark thinks the sell-off on Wall Street is “not over yet,” Cramer said. “We can see the light at the end of the tunnel, but we are still in the tunnel.”

Cramer’s breakdown of DeMark’s analysis on Wednesday comes a day after reviewing charts from technical analyst Carolyn Boroden, who predicted the S&P 500 will soon experience a temporary rebound.

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