To get a sense of whether last year's rally is set to continue in 2018, Jim Cramer checked in with Bob Lang, founder of ExplosiveOptions.net and technical analyst on TheStreet.com's Trifecta Stocks newsletter, in Cramer's "Off the Charts" segment Tuesday night on Mad Money .
They started by looking at a chart of the S&P 500 for 2017, with Lang noting that for the first time ever, the index didn't have a losing month during the entire year. With that amount of momentum, Lang told Cramer it would be a mistake to start getting bearish.
The index's strength started to broaden out in the fourth quarter, with more stocks trading above their 50-day moving averages. The breadth signals that institutions are buying. Lang argues that investors should buy any dip in the S&P, which was a good strategy last year. There were only two pullbacks to the index's 20-week moving average last year, and both were buying opportunities, Cramer noted.
The Chaiken money flow oscillator for the S&P 500 has been positive for two-and-a-half years and continues to rise. Coupled withthe impact of tax cuts and relatively low interest rates, Lang thinks the S&P could be poised for another double digit gain in 2018.
The Dow Industrials chart also shows great strength in the Chaiken money flow oscillator. The relative strength index was overbought for nearly the entire year. Normally overbought equities are due for a pullback, but when the condition persists for a long time, it's called "embedded" and is a sign of significant strength. Volume trends are positive and money flow remains strong for the Dow Jones index. Lang suggests it would be pointless to try to pick a top, but says another 12% to 15% rally is possible this year. There's even a chance of a 20% gain that would take the index to 30,000.
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