Technical analysis from the veteran chartist Ralph Vince indicates the stock market should be able to keep trending higher in the near term, CNBC’s Jim Cramer said Tuesday.
“The charts, as interpreted by … Ralph Vince, suggest that this market can keep drifting higher for the next few months as long as employment stays strong,” the “Mad Money” host said before cautioning: “Please don’t get too complacent as there are signs that not all is well as we go into 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 Labor Department’s weekly jobs reports. Cramer said the technician looks at that piece of jobs data for insights into the health of the economy and, by extension, whether it makes sense to be invested in the S&P 500. Strong labor markets are correlated with ascending stock markets, Cramer said, while recessions tend to be bad news.
Technical analysis Ralph Vince has a model that uses continuing jobless claims to identify risk-on and risk-off periods for the S&P 500.
Mad Money with Jim Cramer
“Right now, Vince says the continuing claims data remains in bull mode. Even though we’re very worried about a Fed-mandated recession, we’ve got an insanely strong labor market here,” Cramer said. “That’s good news for the broader economy, even if it makes the Fed more likely to raise rates aggressively down the road. But this stubbornly resilient job market also offsets some of the damage from those rate hikes.”
“Of course, employment is not the be-all end-all,” Cramer cautioned. “You’ve also got to keep an eye on earnings and dividends and the market’s overall valuation.
For more analysis on those factors, watch the full video of Cramer’s explanation below.