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CNBC's Jim Cramer Cautions Bull Market May End Soon

Published by: Betty on 28th May 2014 | View all blogs by Betty
CNBC's Jim Cramer Cautions Bull Market May End Soon
CNBC stock market analyst Jim Cramer suggested this week that the current bull market may be nearing an end, and the market could be in for a pullback in the next few months.  On his CNBC televsion show “Mad Money,” Cramer cited research from Mark Sebastian of Swan Wealth Advisors because Sebastian had been dead on in the past.  Cramer  noted that Sebastian had correctly predicted the current bull run for the market back in April 2012 after analyzing the VIX, an index used to track volatility in the stock market.  Sebastian noted that between 2002 and 2007, the years leading up to the last major crash, the VIX routinely spiked, then fell to new lows.  Just before the crash, Sebastian noted, the VIX began hovering at higher levels, getting nowhere near its prior lows after spiking.  This overall rise in the VIX, Sebastian suggests, served as an omen that the S&P 500, which almost always moves in the opposite direction as the VIX, was about to crash, which it did.
 
While Cramer took Sebastian's research as a warning, extending that advice to his viewers, the analyst's latest research does not predict a crash in the S&P anytime soon.  Instead, his research suggests a sizable decline in the Russell 2000, which trades inversely to another volatility index called the RVX.  That index, Sebastian said, spiked in February but failed to drop back to its previous low of 16, instead establishing a new normal low of 18.  Based on Sebastian's observations with the S&P and the VIX, Cramer noted, this trend is disturbing for the Russell 2000.  And if a bear market hits the S&P Cramer said, it won't be long before the S&P, Nasdaq and Dow Jones follow suit.  Cramer did say that there are also reasons for optimism in the markets, but Sebastian's concerns are worth considering because of his uncanny accuracy in the past.

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