Analyst Larry Williams Sees Bottom in Formation

CNBC’s Jim Cramer on Friday explained fresh technical analysis from seasoned chartist Larry Williams that signals the market is headed to the bottom.

“I know it’s hard to believe anything positive right now, but I said the exact same thing in April 2020 and then Larry Williams made one of the best bottom calls I’ve ever seen,” Mad Money host said. “. referring to the fact that the market has risen sharply since the start of the Covid pandemic, which caused a shock in the global economy.

“He says that’s it… I wouldn’t bet against him. I trust his predictions more than I despise this market, and I say this as someone who really hates the cassette,” he added.

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

According to Cramer, the futures line is in black, while the advance/fall line, a cumulative indicator that measures the number of stocks rising daily compared to the number falling in price, is in blue.

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

“Right now you can see that while the S&P spent the last week in oblivion, the up/down line has held up much better. In fact, it was steadily rising up,” he said.

He noted that this pattern – when an important indicator moves in the opposite direction from the index – is called a bullish divergence. “According to Williams, this advance/decline move is incredibly positive for the market. It tells you that in terms of latitude, the worst of this decline may be behind us,” Cramer said.

Cramer then studied the daily chart of the S&P futures, which showed the balance sheet volume index in purple. The chart shows that trading volume has already begun to “dry out on the selling side,” Cramer said.

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

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

And since the balance sheet volume line has held up despite the S&P hitting new lows, the chart is in line with what Williams expects to see in “a declining market where some big money managers are finally starting to buy stocks more aggressively,” Cramer says. said.

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

“Look at the bottom of the chart, this is the Williams Index…of Traders’ Commitments, which shows what professional money managers are doing with their futures positions,” Cramer said. “Even though the market is down, Williams sees the pros buying here and that often results in a significant rally,” he added.

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

“Right now, this cycle suggests that the S&P is ready to go … and if the cycle continues, Williams expects it to continue until mid to late June,” Cramer said.

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