CNBC suggests that investors prepare for more difficult trading environments next year than the 2021 gains. Jim CramerTuesday’s statement was based on DeCarley Trading cofounder technical analysis Carley Garner.

“The charts, as interpreted by Carley Garner, suggest that the S&P 500 could still have some more upside thanks to that Santa Claus rally that normally gets going at this time of December,” the “Mad Money”Host said. “But, as we move into 2022,” she said.

The S&P 500The stock is up 23.8% so far in the year, and almost 108% since March 23, 2020 when it closed at 2,237.40 (pandemic-era low) Cramer noted that Wall Street’s rally has been extraordinary, and Garner said it had also been “extremely unusual.”

Cramer explained that as we face a string of rate rises in the next year, it is important to prepare for more unpleasant action.

One piece of technical data that Garner is considering is the S&P 500’s longer-term monthly chart, according to Cramer. Cramer stated that it has now risen to the top of trend after breaking through the resistance trend line ceiling about a year back.

Cramer explained that these breakouts have almost always seen a retest the trendline. “In other words, she’d expect the S&P to pull back near the trendline, which …would put it around 4,000. This is almost 14% less than the previous figure. … She believes that a closer to 4,000 would allow for an even larger correction.

Garner believes that other troubling signs include Relative Strength Index, which Cramer stated is in excess of its normal range on a monthly basis. He said that if the reading is this high, it could lead to serious declines based on the 20-year history of the market.

Cramer said Garner also sees a concerning story in the weekly chart of the E-mini S&P 500 futures when analyzed alongside data from the Commodity Futures Trading Commission’s commitments of traders report. This includes the holdings for small traders as well as large speculators, and commercial hedgers.

It currently shows that professional money managers are net-long S&P 500 futures to a degree not seen since October 2018, Cramer said. This was “just before a massive decline that didn’t run its course until Christmas Eve the following year.”

Cramer stated that a similar degree of bullishness was seen in the early 2018 right before a sharp correction. When a trade becomes too crowded, there are eventually no buyers and it tends to fall under its own weight.

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