Jim Cramer says 3 factors foreshadowed Thursday’s market comeback

CNBC’s Jim Cramer said Thursday that there were three indicators during Thursday’s trading session that suggested the market’s initial selloff would break down.

Stocks made a stunning reversal on Thursday after the market fought off a consumer price index report warmer than expected to snap a six-game losing streak.

The Dow Jones rebounded more than 1,300 points after declines in volatile early morning trading sessions, while the S&P 500 saw its widest trading range since March 2020.

“We have to remember that there are always people who want out, but there are also people who want in at the right price, or never sell at all,” Cramer said.

Here are the three signals he spotted that suggested the market would rebound:

  1. The S&P 500 Short Range Oscillator, Cramer’s favorite market indicator, hit just over minus 5%, meaning a sell-off probably wouldn’t have much resistance. Anything above plus 4% indicates the market is overbought, while anything below minus 5% indicates the market is oversold.
  2. The CBOE Volatility Index – which is also known as VIX, Wall Street’s fear gauge – did not rise when the market initially fell. That means traders haven’t been scared off and it’s usually a sign that the market is facing a “misdirection game”, according to Cramer.
  3. More importantly, the market did not go lower than where futures won out, he said. This means that there was no follow-up to the sale.

In other words, Thursday’s selloff didn’t last as investors who opted to sell their portfolios after seeing the inflation data underestimated the resilience of the bulls, according to Cramer.

“People who are still in this miserable, horrible, worthless market aren’t going to throw stocks on something they already knew – that the consumer price index is too hot. I mean, no kidding” , did he declare.

Jim Cramer gives his take on Thursday's stock market rally

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