Traders could possibly discover constructive 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 may very well be a troublesome 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 Money” host stated.
“Bear in mind, in the course of the unique 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 either raise the government’s borrowing limit or pause it once again.
Trying on the S&P 500, particularly, Cramer stated Williams sees diminishing breadth when tallying the variety of advancing shares versus declining shares. That is along with a troublesome seasonal interval for the broad fairness index, which is up 16.8% 12 months so far, Cramer stated.
Advance/decline quantity within the S&P 500 based mostly on technical evaluation from Larry Williams.
“Simply because the starting of the summer time, [Williams] can level to 3 moments when the S&P rallied to greater highs however the Advance/Decline line didn’t make the next studying, which means the market went up on not-so-hot breadth,” Cramer defined.
“For Williams, that implies plenty of large cash managers should be promoting lots of their positions. He says he is seen this sample earlier than and it is not wholesome. Usually when shares rally, the Advance/Decline line ought to 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” brief place within the E-mini S&P 500 futures.
The technician additionally sees bearish alerts in a momentum indicator generally known as on-balance quantity, which is calculated by including S&P 500 quantity on constructive days and subtracting it from unfavorable days, Cramer stated.
Latest on-balance quantity for the S&P 500, based mostly on technical evaluation from Larry Williams.
“The S&P makes new highs, however the On Stability Quantity stays flat. That is one other unfavorable. Bear in mind, for technicians, quantity is sort of a lie-detector. When it is weak, meaning a transfer is misleading. Another reason Williams is frightened about the remainder of this seasonally difficult month,” Cramer stated.
The seasonal buying and selling sample for gold across the month of August, based mostly on technical evaluation from Larry Williams.
Then again, Cramer stated Williams’ evaluation exhibits a extra optimistic near-term outlook for gold. “Williams is lengthy gold for exactly the identical cause he is frightened in regards to the S&P: The seasonal sample,” Cramer stated.
Moreover, Cramer stated knowledge from the Commodity Futures Buying and selling Fee exhibits industrial hedgers have just lately been shopping for gold futures in a sturdy vogue, which traditionally has led to “a pleasant rally.”
Gold’s worth compared to Treasury bonds is one other piece of data working in favor of the dear steel, based mostly on Williams’ evaluation, Cramer stated.
Charts from technical analyst Larry Williams that have a look at gold’s valuation in comparison with Treasury bonds.
“As you possibly can see from the chart, not solely does the dear steel have a robust seasonal development on its aspect … but it surely’s extraordinarily undervalued versus the bonds,” Cramer stated.