CNBC’s Jim Cramer on Monday laid out a playbook for investors in the event the S&P 500 pulls back from its highs.
“If history is any guide, next week’s gonna be ugly,” he said.
The “Mad Money” host offered the recommendation after reviewing chart analysis from noted technician Larry Williams, who sees a pullback playing out next week.
“If you’re a nimble trader, you might want to sell the S&P at the opening next Monday then swap back in near the end of the week,” Cramer said. “Even if you’re not that nimble, watch out for the weakness, because it could create a nice buying opportunity.”
The S&P 500 has turned in three record closes in as many days, finishing Monday’s session at 4,255.15. Williams, who makes a habit of spotting seasonal patterns, is warning about a “late-June swoon,” Cramer said.
Whether it’s just a modest dip or a significant decline, stocks tend to get hit near the end of the month, according to Williams. Cramer said he wouldn’t bet against the forecast.
Last year the index fell almost 5% from top 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 last 22 years,” Cramer said. “If the S&P starts getting crushed, I want you to remember that you’re up against a powerful seasonal trend. You want to start bottom fishing.”
The seasonal pullback could be followed up by another pattern Williams calls the Fourth of July trade, Cramer highlighted.
Last year the S&P 500 bounced from under 3,000 in late June, rising more than 6% by July 10.