Monday, March 11, 2013

Tom DeMark calls a top for the market

Last week, Tom DeMark came out publicly stating he felt the S&P 500 would top out at 1567.

I've been a user of DeMark indicators for 10+ years and have found them to be quite powerful. Granted, they can be tricky to interpret and it's taken me years to grow comfortable with their nuances. But nothing is the "Holy Grail," meaning one should never put too much emphasis on any one indicator, instead preferring to use a suite of uncorrelated tools to help make decisions.

That said Mr. DeMark has made many prescient calls over the years, the latest being his call in December for China's Shanghai index to rally -- not bad! I respect his calls, however I still believe risk-on remains the prevailing market bias for the near future. As I wrote previously, the YTD rally came with extended and robust momentum, which typically has carry-through in the form of thrust. I'm not saying 1567 won't be a top, it could very well be, assuming we get there. But fortunately tops take time to form, in contrast with more fast-and-furious declines to bottoms, and as such I believe we'll have time to assess things over the next few weeks and make a decision then if indeed the market is acting as if a top is in.

In the meantime, I show below three SPY charts which I feel support what Tom is considering in his market call. He particularly highlighted that when 13 signals register across all three time frames (daily, weekly, monthly), it has been very powerful.
                                                                                                         Daily

Weekly

Monthly
 Source: Bloomberg

3 comments:

  1. DeMark is a fraud. He sucks people for money and offers no value

    ReplyDelete
    Replies
    1. yes, i know this comment is from 2014, but its true. i watched some youtube videos of him. he calls simple trend lines TD lines, and he thinks he has trade marked a bunch of stuff. his indicators do not exist for trading view because they are always taken down for copyright infringement. the ones that are still up are incorrect. If his system made him any money, why does he sue people and trademark all his ideas

      Delete