“The charts, as interpreted by legendary Larry Williams, suggest that August could be a tough month for the S&P 500, but a great month for gold. Considering the backdrop at the moment, that wouldn’t surprise me at all. “Mad Money” host said.
“Remember, during the initial debt ceiling debacle ten years ago, the stock market collapsed and… gold performed very well,” Cramer added, alluding to the fact that a two-year debt ceiling suspension expired at the end of July and Congress must now either increase the government’s borrowing limit or suspend it again.
Looking at the S&P 500, in particular, Cramer said Williams sees a decrease in magnitude when counting the number of rising stocks versus falling stocks. This adds to a difficult seasonal period for the general stock index, which is up 16.8% since the start of the year, Cramer said.
“For Williams, this suggests that many fund managers have to sell a lot of their positions. He says he’s seen this trend before and it’s not healthy. Normally, when stocks rally, the Advance / Decline line should hit new highs. But this is not the case. is happening and that means this move could have feet of clay, ”Cramer said, while revealing that Williams took a“ small ”short position in E-mini S&P 500 futures.
The technician also sees bearish signals in a momentum indicator called equilibrium volume, which is calculated by adding the volume of the S&P 500 on positive days and subtracting it from negative days, Cramer said.
In addition, Cramer said that data from the Commodity Futures Trading Commission shows that trading hedges have recently bought gold futures in a robust fashion, which has historically led to “a nice rally.”
Another piece of information that works in favor of the precious metal is the value of gold relative to Treasury bonds, according to Williams’ analysis, Cramer said.