Investors should take profits with markets poised to cool off

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CNBC’s Jim Cramer said the market could continue to stall out after Wednesday’s slump and urged investors to trim some of their positions.

“Things can still go right. I don’t want to freak you out. I just think stocks need a cooling-off period after this miraculous run, and we’re getting one for certain,” he said. “And you should take something off the table.”

The market has rallied since mid-June, buoyed by declines in commodities and cheery inflation readings in July.

However, the rally appeared to lose momentum on Wednesday with the major indices decreasing on the heels of mixed earnings reports from retailers and notes from the Federal Reserve’s July meeting.

The “Mad Money” host outlined three reasons why he believes why Wednesday’s market action could be just the beginning.

The market’s overbought

The S&P 500 Short Range Oscillator, a trusted indicator used by Cramer and CNBC’s Investing Club, helps predict when the market has become too overbought or oversold and positioned for a reversal. 

The Oscillator has been overbought since late July, which means the market might be due for a pullback, according to Cramer.

As a result, he advised investors to ring the register on the stocks that have rallied with the rest of the market starting in June.

The Federal Reserve isn’t done raising rates

There’s too much froth in the market

Jim Cramer’s Guide to Investing

Click here to download Jim Cramer’s Guide to Investing at no cost to help you build long-term wealth and invest smarter.

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