Buyers could possibly discover optimistic returns in gold whereas the S&P 500 enters a traditionally difficult month, CNBC’s Jim Cramer stated Monday.
“The charts, as interpreted by the legendary Larry Williams, recommend that August might be a tricky month for the S&P 500, however a terrific month for gold. Given the large image backdrop proper now, that would not shock me one bit,” the “Mad Cash” host stated.
“Keep in mind, throughout the authentic debt ceiling debacle a decade in the past, the inventory market broke down and … gold did nice,” Cramer added, alluding to the actual fact a two-year suspension of the debt ceiling expired on the finish of July and Congress now must both elevate the federal government’s borrowing restrict or pause it as soon as once more.
Trying on the S&P 500, specifically, Cramer stated Williams sees diminishing breadth when tallying the variety of advancing shares versus declining shares. That is along with a tough seasonal interval for the broad fairness index, which is up 16.8% 12 months thus far, Cramer stated.
Advance/decline quantity within the S&P 500 primarily based on technical evaluation from Larry Williams.
“Simply because the starting of the summer season, [Williams] can level to 3 moments when the S&P rallied to larger highs however the Advance/Decline line did not make a better studying, that means the market went up on not-so-hot breadth,” Cramer defined.
“For Williams, that implies a lot of large cash managers have to be promoting a lot of their positions. He says he is seen this sample earlier than and it isn’t wholesome. Usually when shares rally, the Advance/Decline line must be making new highs. However that is not taking place and it means this transfer may have toes of clay,” Cramer stated, whereas disclosing Williams has taken a “small” quick place within the E-mini S&P 500 futures.
The technician additionally sees bearish alerts in a momentum indicator often called on-balance quantity, which is calculated by including S&P 500 quantity on optimistic days and subtracting it from damaging days, Cramer stated.
Current on-balance quantity for the S&P 500, primarily based on technical evaluation from Larry Williams.
“The S&P makes new highs, however the On Steadiness Quantity stays flat. That is one other damaging. Keep in mind, for technicians, quantity is sort of a lie-detector. When it is weak, meaning a transfer is misleading. Another reason Williams is anxious about the remainder of this seasonally difficult month,” Cramer stated.
The seasonal buying and selling sample for gold across the month of August, primarily based on technical evaluation from Larry Williams.
Then again, Cramer stated Williams’ evaluation reveals a extra optimistic near-term outlook for gold. “Williams is long gold for precisely the same reason he’s worried about the S&P: The seasonal pattern,” Cramer said.
Additionally, Cramer said data from the Commodity Futures Trading Commission shows commercial hedgers have recently been buying gold futures in a robust fashion, which historically has led to “a nice rally.”
Gold’s value in comparison to Treasury bonds is another piece of information working in favor of the precious metal, based on Williams’ analysis, Cramer said.
Charts from technical analyst Larry Williams that look at gold’s valuation compared to Treasury bonds.
“As you can see from the chart, not only does the precious metal have a powerful seasonal trend on its side … but it’s extremely undervalued versus the bonds,” Cramer said.