Analyst Larry Williams sees a bottom in the mold

CNBC’s Jim Cramer on Friday explained recent technical analysis from veteran Larry Williams which signals that the market is heading for a bottom.

“I know it’s hard to believe anything positive at the moment, but I said the same thing in April 2020, and that was when Larry Williams made one of the best bottom talks I’ve ever seen,” said the “Mad Money” host. refers to when the market spiraled after the outbreak of the Covid pandemic sent shock waves through the global economy.

“He says this is it. … I would not bet on him. I trust his predictions more than I despise this market, and I say it as someone who really hates the tape,”[ads1]; he added.

Cramer began his explanation of Williams’ analysis by examining the S&P 500 futures chart.

The futures line is in the black and forward / down line, a cumulative indicator that measures the number of stocks going up on a daily basis versus the number going down is in blue, Cramer said.

Williams sees the up / down line as an indicator of the market’s internal strength or weakness, according to Cramer.

“Right now you can see that while S&P spent the last week being crushed into oblivion, the up / down line has held up much better. In fact, it has been working ever higher,” he said.

He noted that this pattern – when an important indicator goes the opposite way of an index – is called a bullish divergence. “According to Williams, this action in the up / down line is incredibly positive for the market. It tells you that from a broad perspective, the worst of this downturn may be behind us,” Cramer said.

Cramer then inspected the daily S&P futures chart plotted with the purple volume index. The chart reveals that trading volume has already begun to “dry up on the sales side,” Cramer said.

He noted that the volume index on balance is a cumulative indicator that measures volume flow by adding the volume on up-days and subtracting on down-days.

“We care about this because volume is like a polygraph test for technicians: High volume movements tell the truth. Low volume movements [are] often misleading, “he said.

And because the volume line on balance sheet has remained despite S&P reaching new lows, the chart is in line with what Williams would expect to see in “a declining market where some large money managers have finally just started buying stocks more aggressively,” Cramer said. .

He also showed a chart showing the S&P 500 futures plotted with Williams’ insider activity indicator, in green.

“Look at the bottom of the chart – this is Williams … commitments to traders, which show you what professional money managers do with their futures positions,” Cramer said. “Even though the market is down, Williams sees professionals buying here, and it often sets up significant rallies,” he added.

Finally, Williams observed the dominant cycles of the S&P 500, which usually last for 75 days.

“Right now, that cycle says S&P is ready to go … and if the cycle lasts, Williams will expect it to continue in mid to late June,” Cramer said.

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