On last Friday's Mad Money on CNBC, Jim Cramer presented the charts as interpreted by Larry Williams, a legendary technical analyst. Accordingly, the charts suggest that September could get uglier. In this post, we will summarize Jim Cramer's segment, add some charts that we made, and provide the game plan.

First is the chart of the S&P 500, comprising data from 1998 - 2020. As you can see, September 17 is when the market usually takes a downturn (again, this is compiled data for the past 20 years). Also, according to Larry Williams' trading data, if you sell short the S&P500 7 trading days before the close of the month (which brings it to about September 21-23), you made the most profit 100% of the time for the past 20 years. Furthermore, holding such short trade for 14 days made the most profit, 70% of the time (compared to other durations of short holdings; for example holding it for 2 days made about 1/3 of holding for 14 days, but winning rate is 100%).

Let's also look at the S&P500 chart that we annotate.

There are 3 indicators on this chart. First, the Tom DeMark's sequential count marked a near-term sell recommendation a few days ago (with green number 9), indicating a possible top. Second is the volume profile (bars on the right), indicating which price areas have the strongest trading volumes; this will come handy in a little bit. Lastly, there is the Moving Average 50 (blue line), which is not too far away from where we are trading. This has been support for the past 3 selloffs since June. Last is the trading range (black lines top and bottom), drawn through the tops and bottoms of the S&P500 since September 2020.

Here's what we're thinking: if we continue to go down, expect the MA50 to serve as support. If the MA50 fails to support, given also the break of drawn trendline, we expect the S&P500 to go down to 4200 (the next strong volume price area).