CNBC’s Jim Cramer warned investors on Monday that they should trim some of their positions to prepare for a possible market decline.
“According to the S&P oscillator which I’ve followed for ages, we’re very overbought right now,” he said. “You have to hold your nose and sell something because we’re about to back down.”
The S&P 500 short-range oscillator, one of his long-time favorite market indicators, helps signal when the market has become overbought and possibly due to a pullback, or too oversold and due to a rebound. In other words, it helps predict when the market is going to pivot.
The oscillator is above 8%, which means the market is incredibly overbought and should see a pullback, according to Cramer.
Shares made a significant comeback in October, although they fell on Monday. The Dow Jones Industrial Average jumped 13.95% in its best month since 1976, while the S&P 500 and Nasdaq Composite rose about 8% and 3.9%, respectively, this month.
“In this environment, you need a bit of health and consumer products stocks to start with, then you take industrials when you think the Fed is almost done tightening,“ Cramer said. “And you stick with the banks no matter what.”
On the other hand, the tech names are likely to sell off after a disastrous earnings season, according to Cramer. He named Metaplatforms, Alphabet, Apple, Amazon, You’re here, Microsoft and semiconductor stocks as the most likely to sell off in the impending sell-off.
“The tyranny of technology has been overthrown, and no one wants to go near these things,” he said.
Disclaimer: Cramer’s Charitable Trust owns shares of Meta, Alphabet, Apple, Amazon and Microsoft.