CNBC’s Jim Cramer said on Tuesday that stocks could bottom out later this month and present investors with an opportunity to add to their portfolios.
“The charts, as interpreted by Larry Williams, suggest that the bear market is more or less… toasted and, even if the current rally stalls, predicts a big move later this month or early November,” Cramer said.
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Stocks gained on Tuesday after the August job vacancies report which indicate that the labor market is coolingcontinuing the rally from the previous trading session.
Cramer said Williams wouldn’t be surprised if the current rally died down, but he still believes there will be a significant dip towards the end of the month, followed by a rally through Election Day on Nov. 8.
“In other words, he thinks you should prepare for a tremendous buying opportunity, even if the current ruling is repealed,” Cramer said.
To explain Williams’ analysis, he first looked at the S&P 500 futures chart, in black. The chart also shows what Williams calls the true seasonal pattern, in blue.
The model is based on historical action at some point in the year, and Williams notes that the market tends to bottom out in mid to late October and then leads 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 Jones also has a double bottom followed by a rally around the same time as the S&P 500, meaning there should be a tremendous buying opportunity, he said.
For more analysis, watch Cramer’s full explanation below.