The Washington City Times’s Jim Cramer set out on Monday a roadmap for investors in case the S&P 500 pulls back from its highs.
“If history is any guide, next week is going to be ugly,” he said.
The “Mad Money” host made the recommendation after reviewing noted engineer Larry Williams’ chart analysis, who sees a relapse next week.
“If you’re an agile trader, you might want to sell the S&P at the opening next Monday and trade it back in by the end of the week,” Cramer said. “Even if you’re not that nimble, watch out for the weakness, because it can be a great buying opportunity.”
The S&P 500 has made three record closes in as many days, ending Monday’s session at 4,255.15. Williams, who makes a habit of spotting seasonal patterns, warns of a “swoon at the end of June,” Cramer said.
Whether it’s a modest dip or a significant drop, stocks tend to hit toward the end of the month, according to Williams. Cramer said he wouldn’t bet against the prediction.
Last year, the index fell nearly 5% from peak to trough between June 23 and June 26.
“Based on Williams’ analysis, shorting the market next week has been a good strategy for at least the past 22 years,” Cramer said. “When the S&P starts to get crushed, I want you to remember that you’re dealing with a powerful seasonal trend. You want to start bottom fishing.”
The seasonal pullback could be followed by another pattern Williams calls the Fourth of July trade, Cramer emphasized.
Last year, the S&P 500 bounced from below 3,000 at the end of June and rose more than 6% on July 10.