CNBC̵[ads1]7;s Jim Cramer said Tuesday that stocks could bottom out later this month, giving investors an opportunity to add to their portfolios.
“The numbers, as interpreted by Larry Williams, suggest that the bear market is more or less … toast, and even if the current rally stalls, he predicts a big move either by the end of this month or early November,” Cramer said.
Stocks rose on Tuesday after the August jobs report indicated that the labor market is cooling, continuing the gains from the previous trading session.
Cramer said Williams wouldn’t be surprised if the current rally ends, but he still thinks there will be a meaningful bottom toward the end of the month, followed by a rally through Election Day on Nov. 8.
“In other words, he thinks you should be prepared for a terrific buying opportunity, even if the current move is reversed,” Cramer said.
To explain Williams’ analysis, he first examined the chart of S&P 500 futures, in black. The chart also has what Williams calls the true seasonal pattern, in blue.
The pattern is based on the historical action at a given time of the year, and Williams notes that the market tends to fall in mid-to-late October and then lead to a “powerful” rally, Cramer said.
He then looked at a chart of the Dow Jones Industrial Average with the same true seasonal pattern.
The Dow also happens to have a double bottom followed by a rally around the same time as the S&P 500, which means there should be a huge buying opportunity, he said.
For more analysis, see Cramer’s full explanation below.