CNBC’s Jim Kramer on Friday explained a new technical analysis by veteran chartist Larry Williams, which signals that the market is heading for the bottom.
“I know it’s hard to believe anything positive at the moment, but I said the same thing in April 2020, and then Larry Williams made one of the best calls I’ve ever seen,” the Mad Money presenter said, referring to This, when the market boomed after the beginning of the Covid pandemic, caused shock waves in the world economy.
“He says that’s all. … I wouldn’t bet against him. I trust his predictions more than I despise this market, and I say him as a man who really hates the tape,” he added.
Kramer began his explanation of Williams’ analysis by looking at the S&P 500’s futures chart.
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The futures line is in black, and the forward / downward line, a cumulative indicator measuring the number of stocks that are rising on a daily basis relative to the number down, is in blue, Kramer said.
According to Kramer, Williams views the forward / downward line as an indicator of internal strength or weakness in the market.
“Right now you can see that while S&P has spent the last week in oblivion, the forward / downward line is holding up much better.
He noted that this pattern – when an important indicator goes in the opposite direction of the index – is called bullish divergence. “According to Williams, this action in the up / down line is incredibly positive for the market. It tells you that in terms of latitude, the worst of this decline may be behind us,” Kramer said.
Kramer then inspected the daily chart of S&P futures, drawn with the balance sheet volume index in purple. The chart reveals that trade volume has already begun to “dry up on the sales side,” Kramer said.
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He noted that the balance sheet volume index is a cumulative indicator that measures volume flow by adding volume on days up and subtracting days on decline.
“We care about this because volume is like a polygraph test for technicians: high-volume movements tell the truth. [are] often misleading, “he said.
And as the balance sheet line has remained, although S&P has reached new lows, the chart is in line with what Williams would expect to see in a “low market where some big money managers have finally just started to. they buy stocks more aggressively, ”Kramer said.
He also showed a chart showing S&P 500 futures plotted with Williams’ internal activity indicator in green.
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“Look at the bottom of the chart – this is the Williams Merchants’ Commitment Index, which shows you what professional money managers do with their futures positions,” Kramer said. “Although the market is down, Williams sees professionals buying here, and this often causes significant increases,” he added.
Finally, Williams observed the dominant cycles for the S&P 500, which usually lasted 75 days.
“Currently, this cycle says that S&P is ready to work, and if the cycle continues, Williams would expect it to continue until mid-June,” Kramer said.
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