A Wall Street legend is warning investors that market stocks will fall between now and October 10. He also cautions that gold won’t act as a hedge against losses.
Larry Williams, who often appears on CNBC's Mad Money with Jim Cramer and is highly sought after in both the US and Europe for his insights, says we are entering a period that will see a significant and sustained selloff in the markets over the next few weeks.
“We’re most likely going to have a pullback in the market here,” says Williams.
Williams uses a time-tested recipe to make his market calls, relying on a mix of fundamentals, seasonal trends, technical signals and insights pulled from the Commitment of Traders report put together by the Commodity Futures Trading Commission (CFTC).
Williams says the best way to make money in the coming weeks is the “Machu Pichu trade,” believe it or not. He discovered this signal in 2014 while traveling to the ancient Inca ruin with this wife. This pattern has shown that over the last 22 years, selling on the seventh trading day before the end of September has netted short-term profits 100% of the time.
This year, the seventh day before the end of the month falls on September 22.
Williams has also found that selling on the 11th through the 20th trading day of September has resulted in profits 80%-95% of the time. There is one exception, however. Sales on the 17th trading day have resulted in profits 75% of the time, slightly below the average.
This year the 11th through 20th trading days are September 15-28. Williams says the trades should be short term, usually a few days or less. He says historically stocks peak for the month during this period. They start trending downward through the middle of October, a pattern he expects to repeat this year.
Gold Won’t Protect Against Losses
Williams warns that gold won’t necessarily rise during a down market and protect against losses, despite that being a popular belief. He says gold has slumped alongside stocks during many of the major market selloffs. This is something he expects will happen over the next three to four weeks. Williams advises to sell gold into rallies and wait for the drop before buying back in.
He says there’s a gold pattern that plays out every year: gold peaks in mid-September and then slowly drops for the rest of the year. Adding to the concerns about gold prices, Williams says the seasonal gold pattern is already weak. This adds to the bearish outlook.
“Gold has not been able to stay in step with what happened in the past, therefore the seasonal pattern should work this year,” he says.
Williams is bullish on the US dollar, saying the “smart money” is buying right now.
“I’m wildly bullish over next six months,” says Williams, “There’s a pretty good rally coming in the dollar.”