Wall Street could be set to embark on a bullish run over the next month, CNBC's Jim Cramer said Tuesday.
Based on analysis from Larry Williams, the renowned stock trader credited for creating a number of market barometers including the aptly named Williams %R momentum indicator, investors should expect the stock market to cycle through a hot streak in September, a steep fall in October and another upswing at the end of that month.
"The charts, as interpreted by the legendary Larry Williams, suggest that it's time to stop panicking, stop complaining and start buying," the "Mad Money" host said. "He thinks the cycle of fear and negativity has run its course. So if the averages haven't bottomed already, they're going to bottom very soon."
Williams, the author of nearly a dozen books particularly on stocks and commodities trading, made his prediction by assessing three charts: the advance/decline line, the volatility index and the S&P 500.
The advance/decline line is a technical indicator that tracks the sum of stocks that both rise and fall during a trade day. The line appears to run through a repeating series of rallies and sell-offs over the past year, which Williams relies on to forecast the direction that stocks are prepared to go, Cramer said. The chart suggests the market could rally through the month of September, followed by a drop in October, he said.
"But if his pattern holds true, Williams says you're going to want to buy again at the end of October, looking at another major run as we head into the end of the year," the host said.
Turning to the Cboe Volatility Index, or the VIX, Cramer said the veteran technician projects that it's on the verge of declining. The VIX, also known as the fear gauge, is currently just north of 20 and usually runs counter to the S&P 500. It's an indicator of investor sentiment.
"It's a pretty ironclad correlation and it only breaks down when the market's about to make a major reversal," Cramer said. "Remember, when the VIX goes down, the stock market goes up. So this volatility cycle suggests it's time for the S&P 500 to rally ... likely through the end of September."
In the S&P 500 E-minis, which is used for futures trading of the broad market average, Williams found a repeating 80-day cycle in the past 10 months, Cramer said. The chart also indicates that a rally could be in store, although it does not give any insight how high the market could go, he added.
"That's why Williams says you need to be a buyer here, just as long as you're ready to ring the register on part of your position a month from now, when these cycles may turn against you," Cramer said.
The S&P 500 closed Tuesday's session down nearly 10 points to 2,869.16.