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"Fear meter" shows that the market is moving towards "choppy water"



Investors should be cautious, despite Wall Street's big rally on Tuesday, CNBC's Jim Cramer warned.

The market is wandering through a volatile period and Mark Sebastian, who "Mad Money" host is called "VIX champion," is calling for vigilance. VIX, or the CBOE Volatility Index, measures market risk based on investor opinions on shares listed on the S&P 500.

Cramer looked at analysis from Sebastian to read about market status.

"Although he does not predict a major downturn, he thinks you should prepare for choppy water and perhaps a modest decline," Cramer said. "The average values ​​have not really digested recent gains, and as we saw last week, higher movements higher can result in some serious stock market flows."

VIX, called the "fear meter," and the S&P 500 index typically run in opposite directions, Cramer explained. When they mirror each other, it tends to act as a warning sign.

After a series of tumultuous trading days, the big American average came together on Tuesday and VIX went to about 1

8, Cramer noted. The S&P 500 opened the day during 2,884, sending the news of a tariff delay to trade over 2,943 before almost flat fodder to end the session in 2,927.

worried that the volatility index seems to be creeping up along with the stock market, "Cramer said. In recent years, "every time the S&Ps had a fast rally that failed to really bring down the VIX … it resulted in some form of sales … The most notable was the big inflation in January 2018." [19659002] Sebastian, a technical analyst and founder of OptionPit.com, believes that VIX flashes a yellow light as long as the index is above 16. The cartist warns that the upside is more limited than most might expect, Cramer said.

"He says the market needs to pull back for a couple of days, and hopefully we get a slower, more logical rally," Cramer continued. "Until we have melted the recent gains, Sebastian predicts that the fear meter will remain above 16 and this market will chop."

SE: Cramer goes off the lists to understand investor sentiment in the market

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