Jim Cramer says 3 factors foreshadowed Thursday’s market comeback

CNBC’s Jim Cramer on Thursday said that there were three indicators during Thursday’s trading session that suggested the initial market sell-off would fizzle out.

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

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

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

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

1. The S&P 500 Short Range Oscillator, Cramer’s favorite market indicator, came in at a little more than minus 5%, which means a big sell-off likely wouldn’t have much staying power. 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 the VIX, Wall Street’s fear gauge — didn’t spike when the market initially fell. That means traders weren’t spooked and is usually a sign the market is dealing with a “misdirection play,” according to Cramer. 
3. Most importantly, the market didn’t go lower than where the futures took it, he said. This means that there was no follow-through with the sell-off.

In other words, Thursday’s sell-off had no staying power because the investors who chose to sell off their portfolios after seeing the inflation data underestimated the bulls’ resilience, according to Cramer.

“The people who are still left in this miserable, horrible, no-good market aren’t going to dump stocks over something they already knew — that the consumer price index is too hot. I mean, no kidding,” he said.