CNBC's Jim Cramer explained on Friday that Larry Williams, a veteran chartist, believes the market is headed for a bottom.
I said the same thing in April 2020 when Larry Williams made one of the best bottom calls I have ever seen.
I wouldn't bet against him. He said that he trusts his predictions more than he hates the market.
Cramer looked at the S&P 500 futures chart to begin his explanation.
The futures line is black and the advance/decline line is blue, according to Cramer.
The advance/decline line is an indicator of the market's internal strength or weakness, according to Williams.
Right now, you can see that the advance/decline line has been holding up better than the S&P has. He said that it has worked its way higher.
The bullish divergence is a pattern that occurs when an important indicator goes the opposite way of an index. Cramer said that the worst of the decline may be behind us.
Cramer looked at the daily S&P futures chart with the on-balance volume index in purple. The chart shows that the volume of trading has begun to dry up on the sell side.
The on-balance volume index is a cumulative indicator that measures volume flow by adding volume on up days and subtracting volume on down days.
Volume is like a polygraph test for technicians, high volume moves are telling the truth. He said that low volume moves are often misleading.
The on-balance volume line has held up despite the S&P reaching new lows, which is consistent with what Williams would expect to see in a down market.
He showed a chart showing S&P 500 futures plotted with Williams' insider activity indicator.
Cramer said to look at the bottom of the chart to see what professional money managers are doing with their futures positions.
The S&P 500 runs for 75 days.
Cramer said that Williams would expect the S&P to keep running through June if the cycle holds.
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