Charts suggest stock market should move higher in late October

The traditionally weak month of September lived up to its reputation this year, but historical analysis of market patterns shows that better days may be coming.

Jim Cramer presented the analysis of veteran chart analyst Larry Williams on Friday’s edition of “Mad Money.” Williams called the bottom in March 2020 and the slump for the market in September.

“The business is a what-have-you-done-for-me-lately business. It’s truly unforgiving. And lately Williams has had a truly stunning track record, so we keep going back to him,” Cramer said.

Cramer points out that Williams’ chart prediction from the beginning of the year is eerily similar to how the 2021 market has played out.

“For the most part, Williams has been dead right,” Cramer said.

Cramer said he is not always a fan of technical analysis, but it is important to consider it when making investment decisions.

And Williams’ work shows that one of the best buying opportunities of the year is just a few weeks away.

“Williams points out that, just going by the calendar for nearly a century, stocks have started to rally around 0ct. 29. It doesn’t always happen, but on average the period from late October … through late December is typically the strongest time of the year for the market,” Cramer said.

A Chart from the 10/08 episode of Mad Money
History suggests stocks bounce in late October, according to Larry Williams.
Larry Williams, CNBC
Analysis of 47-day and 150-day cycles, another favorite technique of Williams, tells a similar story.

A chart from the 10/08 episode of “Mad Money”
Cycles analysis shows a late-October bottom for the market
Larry Williams, CNBC
“We’ve got two different chart techniques that are both calling for the same outcome. That’s called confirmation,” Cramer said.

According to Williams, buying the S&P 500 futures on the 22nd trading day of October or the first trading day of October has been a consistent winner over the past three decades.

“There’s no guarantee this pattern will work in 2021, but it has worked for the past 31 years and Williams has been on a roll for the past 18 months, so I tell you I wouldn’t bet against him,” Cramer said.

“Maybe I’d start it the third week October, but bottom line: as we get closer to the end of October and the beginning of November, the charts as interpreted by the legendary Larry Williams. So maybe it’s time to get a little more constructive as we near the historic glory days,” he added.

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