Charts suggest ‘it’s going to be a very nice summer’ for stocks, Jim Cramer says

CNBC’s Jim Cramer explained technical analysis from veteran chartist Larry Williams that suggests the market’s recent rebound could last for the next few months.

“Larry Williams perfectly called the bottom the week before last. Now his analysis suggests we’ve got a lot more room to run. He thinks this is not just a short-term bounce, it’s a move that could last through the end of August,” the “Mad Money” host said.

The Dow Jones Industrial Average and the S&P 500 last week saw their best weekly gains since November 2020, though the three major indices, including the Nasdaq Composite, are well below their highs. 

To explain Williams’ analysis, Cramer first examined the monthly chart of the S&P 500 going back to 2008:

The vertical red lines indicate moments where 95% of the index advanced, according to Cramer. He noted there were six instances since 2008 before last week, with each instance a buying opportunity.

“If history’s any guide, this kind of swift rebound should be a major inflection point for our beaten-down stock market,” he said. “According to Williams, we’re dealing with a very bullish situation here. In other words, he thinks last week’s gargantuan rally may be the beginning, not the end.”

Further supporting Williams’ prediction that the market’s rally will last is a 12-year cycle he’s noticed for rebounds in the Dow, Cramer said.

Here’s the chart:

“The last time this 12-year cycle predicted a major move off the bottom was none other than 2010, which turned out to be an excellent time to buy. Now it’s 12 years later … we had a monster move last week,” Cramer said, adding Williams sees an “extremely bullish sign.”

Williams noticed yet another pattern  — this one a dominant 75-day cycle in the Dow — that shows that the market is due for a rally through Sept. 1, according to Cramer.

“In short, he thinks it’s going to be a very nice summer,” the host said.

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