US Stock Market Nearing a Top Similar to 1929 │ Tom DeMark

The stock market has been charging along for months. Perhaps not for much longer. Tom DeMark, an award-winning technical analyst who has advised investors such as Paul Tudor Jones, Leon Cooperman, and Steven A. Cohen, believes a market top is imminent.

DeMark highlights that the Dow Jones Industrial Average, from its December 1914 low to its September 1929 high, rallied 624%. From the 2009 low to this week’s high, the Dow has gained 587%. He notes that the current price action mirrors the patterns from the earlier period.  

 

DeMark focuses on trend exhaustion, with the guiding principle that "markets top on good news and bottom on bad." He uses sequences of 9 and 13 daily, weekly, or monthly bars, which need not be consecutive but must exceed the performance from 4 sessions ago in the 9-model or 2 sessions ago in the 13-model. For more information on DeMark's Sequential 9-13 Setup, visit his website [HERE], and [HERE].

 DJIA (1913-1933, and 2008-current; monthly bars).

"On the daily charts of the Dow and S&P, two new all-time highs are needed to trigger a sell signal."

DeMark suggests the Dow’s optimistic upside potential is 47,045, and for the S&P 500, it is 6,118.

"This could lead to a 5% to 10% pullback or a full breakdown."

 

 DJIA (2019-2024; monthly bars).

He also compares the current rally to the one from 2020 to early 2022. The multi-month advance from late 2022 shows a potential upside projection identical to that earlier move.  

 

 DJIA (Q4 2024; daily bars).

For the S&P 500, DeMark reports that the monthly sequential model countdown is at 12 or 13, with an upside potential of 6,118. The S&P 500 closed Thursday, November 14, at 5,949, unable to maintain gains above the 6,000 mark. 

 

On the daily charts, both the Dow and S&P are at sequential countdown 11, meaning two new all-time highs are needed to trigger a sell signal. This could lead to a 5% to 10% pullback or a full breakdown. "The past two weeks' rally has been precarious. A sudden halt in buying—without selling pressure—could undermine the rally and shift the market into a sellers’ phase."

 

"While good news may last until Trump's inauguration, once buying interest fades, any subsequent rallies are likely to be short-lived." 

  Nvidia (February-November 2024; daily bars).

"A new closing high would mark the end of its rally."

DeMark is also cautious about Nvidia, the key microchip maker driving the AI revolution, which reports results next week. The stock is at countdown 12, and a new closing high would mark the end of its rally. DeMark projects Nvidia’s upside potential at $154.50 but warns the downside risk "could be significant."

 

Reference:
Steve Goldstein (November 15, 2024) - Tom DeMark says the stock market is nearing a top as he draws 1929 parallels.

 

 DeMark's Sequential 9-13 Setup.

 

See also:
Lars von Thienen (November 1, 2024) - The 41-Month Kitchin Cycle Topping Patterns in US Stocks.
Richard Smith (October 29, 2024) - Equities Endgame? Spectrum Cycle Analysis of US Indices.
Sergey Tarassov (September 8, 2024) - Kitchin Cycle Suggests DJIA Decline Until End of 2025. 

 

 S&P 500 Seasonal Pattern for the Presidential Election Cycle 2024 - 2027.
4 Year Presidential Cycle in line with the Decennial Cycle. 

Trends and turning points are more important than levels. 60-, 80-, or 120-Year Cycle?

U.S. Stock Market Seasonality of the Week Before Thanksgiving │ Jeff Hirsch

DJIA has a fair track record over the last 31 years, rising 20 times the week before Thanksgiving (November 18-22) with an average gain of 0.44% in all years. But the other major U.S. stock market benchmarks are not as strong and there has been more weakness the past seven years. Since 2017, DJIA has advanced just once during the week before Thanksgiving.

Week Before Thanksgiving: DJIA Up 20 of 31, but Down in 6 of the Last 7.

 

Over the last 31 years, S&P 500 and NASDAQ have the same record, up 18 times, with similar average gains of 0.20% and 0.23% respectively. Russell 2000 has been the weakest, up 16 times with an average gain of 0.08%. Last year, the week before Thanksgiving, enjoyed solid across-the-board gains as the market recovered from a correction.

Should weakness materialize next week, it may be a solid set up for the Thanksgiving trade of buying into weakness the week before Thanksgiving and selling into strength around the holiday and/or during typical November end-of-month strength.

Quoted from:
Jeffrey A. Hirsch (November 15, 2024) - Week before Thanksgiving DJIA Up 20 of 31, But Down 6 of last 7. 

 

See also:
Jeffrey A. Hirsch (November 5, 2024) - Bullish Novembers in Election Years Have Weak Seasonal Points.
Jeffrey A. Hirsch (November 6, 2024) - Presidential Election Day to Yearend Historically Bullish.

Presidential Election Day to Yearend Historically Bullish │ Jeff Hirsch

With a clear winner decided, the history of market gains from Presidential Election Day to year-end is encouraging. As shown in the tables above and below, the market tends to rally from Election Day to year-end, with a few exceptions due to exogenous factors.

 DJIA up 72.2% of the time, with an average gain of 2.38%.
S&P 500 up 66.7% of the time, with an average gain of 2.03%.
NASDAQ up 76.9% of the time, with an average gain of 1.50%.
Russell 2000 up 61.5% of the time, with an average gain of 4.93%.

Profit-taking at the end of 1984 kept stocks flat after the rally from the July bear market bottom, driven by anticipation of Reagan’s landslide reelection victory. The infamous undecided election roiled stocks at the end of 2000 amid the dot-com bear market of 2000-2001. The Great Financial Crisis and the 2007-2009 generational bear market caused a further plunge in late 2008, fueled by shrinking economic data and uncertainty surrounding a change in party and the incoming, unknown Obama administration. The escalating European Debt Crisis kept the stock market on edge in late 2012.

 » Bullish update: We have a winner. «

Jeffrey A. Hirsch, November 6, 2024.

Overall, from Election Day to year-end, the DJIA is up 72.2% of the time, with an average gain of 2.38%. The S&P 500 is up 66.7% of the time, with an average gain of 2.03%. The NASDAQ is up 76.9% of the time, with an average gain of 1.50%, and the Russell 2000 is up 61.5% of the time, with an average gain of 4.93%.

Reference:
Jeffrey A. Hirsch (November 6, 2024) - Presidential Election Day to Yearend Historically Bullish.

 

See also:

Jeffrey A. Hirsch (November 5, 2024) - Bullish Novembers in Election Years Have Weak Seasonal Points.

Jeffrey A. Hirsch (2011) - S&P 500 Projection Chart from 2009 to 2025.
Ryan Detrick (October 28, 2024) - Best Six-Month Stretch for the S&P 500 Begins in November.

Bullish Novembers in Election Years Have Weak Seasonal Points │ Jeff Hirsch

The first 5-6 trading days are typically bullish, followed by weakness in the week before Thanksgiving. The DJIA and S&P 500 strength has shifted to mirror the NASDAQ and Russell 2000, with the most bullish days occurring at the beginning and end of the month.

 

Jeffrey A. Hirsch, November 5, 2024

 

 November Performance in “All Years” (1930-2015) and “Election Years” (1932-2012) 

— Jeff Hirsch, November 15, 2016.

 

November Market Performance (2001-2021) — Jeff Hirsch,  October 20, 2022.

 

 S&P 500 and Nasdaq average performance during the presidential election week.

 

See also:

Jeffrey A. Hirsch (2011) - S&P 500 Projection Chart from 2009 to 2025.
Ryan Detrick (October 28, 2024) - Best Six-Month Stretch for the S&P 500 Begins in November.

 

S&P 500 Seasonal Pattern for November of the Election Year 2024.
Alternative approach: 4-Year Presidential Cycle in Line with the Decennial Cycle.

S&P Cycle Analysis - Time and Price Projections Update | Steve Miller

The upcoming week marks the pre-election period, where heightened election anxiety and a significant earnings schedule are expected to drive high volatility. This trend is likely to continue through election day. Historical analysis shows that the September to November timeframe has often been associated with increased risk, frequently leading to substantial market corrections.

 

SPY (weekly bars), the MACD, and the extreme stretch between the 13-week and 89-week 

moving averages, which historically always leads to extended corrections.

 

Stocks have demonstrated remarkable resilience, displaying behavior that can be characterized as extreme. The above weekly chart of the SPY highlights this dynamic, tracking the moving average convergence divergence (MACD) alongside the distance between the 13-week and 89-week moving averages. Currently, the MACD indicates an unusually wide gap between these averages, suggesting a potential correction on the horizon.

 SPY (weekly bars), six-month cycles, three-month cycles.

When such corrections occur, they can be quite severe. Although the market has remained strong, November and December are anticipated to experience downturns due to the current extremes, which could lead to several challenging weeks ahead. Nevertheless, broader analysis suggests that the bull market may extend into 2025 before facing a significant downturn, potentially resulting in years of low or negative returns in the stock market.

 SPY (daily bars) and 21-trading day cycles with projected ideal troughs around 

November 6 (Wed) and December 4 (Wed), with a margin of ±3 trading days.

An examination of the SPY across various timeframes, including weekly and two-hour metrics, reveals a deterioration in the two-hour indicators, often the first sign of an impending correction. Historical examples, such as the market's reaction following the 2016 Trump election, highlight the potential for volatility. On that occasion, the Dow fell nearly 800 points before rebounding. Similar large movements are anticipated in the days leading up to and following this forthcoming election. While signs of a downturn have been expected for weeks, the market continues to set the course, underscoring its ultimate authority.

Reference:
Steve Miller (October 25, 2024) - S&P 500 Cycle Analysis - Time and Price Projections Update (video)

 

 

Hurst Cycles in the S&P 500 — David Hickson, October 9, 2024.

Halloween Trading Strategy Begins Next Week | Jeff Hirsch

Next week provides a special short-term seasonal opportunity, one of the most consistent of the year. The last 4 trading days of October and the first 3 trading days of November have a stellar record the last 30 years. From the tables below:

     S&P 500: Up 25 of last 30 years, average gain 1.96%, median gain 1.61%.
     NASDAQ: Up 25 of last 30 years, average gain 2.43%, median gain 2.29%.

     DJIA: Up 24 of last 30 years, average gain 1.95%, median gain 1.39%.
     Russell 2000: Up 23 of last 30 years, average gain 2.34%, median gain 2.56%.

Many refer to our "Best Six Months Tactical Seasonal Switching Strategy" as the "Halloween Indicator" or "Halloween Strategy" and of course “Sell in May”. These catch phrases highlight our discovery that was first published in 1986 in the 1987 Stock Trader’s Almanac that most of the market’s gains have been made from October 31 to April 30, while the market, on average, tends to go sideways to down from May through October.

Since issuing our Seasonal MACD Buy signal for DJIA, S&P 500, NASDAQ, and Russell 2000, on October 11, 2024, we have been moving into new long trades targeting seasonal strength in various sectors of the market via ETFs and a basket of new stock ideas. The above 7-day span is one specific period of strength during the “Best Months.” Plenty of time remains to take advantage of seasonal strength.

Quoted from:
Jeffrey A. Hirsch (October 24, 2024) - Halloween Trading Strategy Treat Begins Next Week. 

 

 Election-Year Octoberphobia — Jeff Hirsch, October 9, 2024. 

 

 November Performance in “All Years” (1930-2015) and “Election Years” (1932-2012) 

— Jeff Hirsch, November 15, 2016.

 November Market Performance (2001-2021) — Jeff Hirsch,  October 20, 2022.

 

October 28th has, on average since 1950, been the strongest day of the year.
 

 

 S&P 500 average Performance per Day & Day by Day Hit Rate (1928-2024).

 

S&P 500 Seasonal Pattern for Q4 of the Election Year 2024
- Presidential Cycle in line with the Decennial Cycle.
 

The Cycle Composite for 2024 combines the 1-year, 4-year, and 10-year cycles. 

Trends are more important than levels. —  Ned Davis Research, October 15, 2024.

 

 S&P 500 E-mini Futures (daily bars) and current 21-Trading Day Cycle ( ± 3 TD).

 

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Goldman Sachs' technical strategist Scott Rubner indicates that US stocks are entering a favorable trading environment due to capital flow trends. He expects the quiet period for stock repurchases to end on October 25, with listed companies likely to engage in significant buybacks in November and December, estimated at $6 billion per day, accounting for 21.1% of annual buybacks.

As mutual funds, the largest sellers of US stocks, begin to withdraw before Halloween, this may positively impact stock prices. October marks the end of the fiscal year for most mutual funds, potentially leading to sell-offs of underperforming assets for tax reasons. Rubner noted that all 756 mutual funds, valued at $1.853 trillion, end their fiscal year on October 31, 2024. Historically, American households increase stock purchases in November, with capital inflows into mutual funds and ETFs peaking during this month.

 In Q4 2024, the NASDAQ may gain more than double what the S&P gains.

Looking ahead to the US election, Rubner suggests that post-election, market volatility may reset, benefiting various trading strategies. Additionally, strong non-farm payroll growth and shifting inflation expectations are becoming critical market factors, particularly regarding a potential Trump election victory, which may reignite trading interest.

By end of 2024, S&P far above 6,000 —  Scott Rubner, October 15, 2024.

 

See also:
Steve Miller (October 25, 2024) - S&P 500 Cycle Analysis - Time and Price Projections Update (video)

October Volatility After Big Gain First Three Quarters | Jeff Hirsch

The history of years with gains of this magnitude at this juncture in the year with solid Q3 and September upside performance for the most part have been followed by more bullish market behavior and a continuation of the rally. But as you can see in the table of S&P 500 Performance Following Big Q3 Year-to-Date Gains the bulk of any damage occurred in October.

Jeff Hirsch — September 25, 2024.

Of the top 30 S&P 500 9-month gains since 1930 all 30 years ended higher with average gains of 25.9%. Q4s were up 24, down 6, average gain 4.6%. Octobers were up 15, down 15 with an average gain of 0.01%. Of the most recent 12 occurrences October is down 7, up 5 with an average loss of -1.1%, which includes the Crash of 1987 and a -21.8% loss for October 1987.

Quoted from: 

Jeffrey A. Hirsch (October 1, 2024) - October Volatility After Big Gain First Three Quarters.

S&P 500 Seasonal Pattern for the Presidential Election Cycle 2024 - 2027

 S&P 500 Seasonal Pattern for the Presidential Election Cycle 2024 - 2027.
4 Year Presidential Cycle in line with the Decennial Cycle.

The chart above is an attempt to merge the Decennial Cycle with the Four-Year Presidential Election Cycle by creating a composite of all US presidential elections that took place since 1900 in the fourth year of a decade (1904, 1924, 1944, 1964, 1984, 2004). 

 S&P 500 Seasonal Pattern for the Election Year 2024.

 

S&P 500 Seasonal Pattern for Q4 of the Election Year 2024.

 

 S&P 500 Seasonal Pattern for October of the Election Year 2024.

 

 S&P 500 Seasonal Pattern for November of the Election Year 2024.

 

 S&P 500 Seasonal Pattern for December of the Election Year 2024.

 S&P 500 Seasonal Pattern for the Post-Election Year 2025.

 

S&P 500 Seasonal Pattern for Q1 of the Post-Election Year 2025.

Cross check dates with historical trends, price probabilities, news calendar, Hurst cycles, etc.

The four-year presidential election cycle has a profound impact on the economy and the stock market, with a distinct pattern emerging over time. Notably, the four-year cycle has become a more significant driver of market behavior than the decennial cycle, except in extraordinary years such as those ending in five and eight. In recent decades, the US has experienced a period of unprecedented prosperity, with returns distributed relatively evenly across the decade. Fourth years, in particular, have tended to perform better than average. Looking back, the last six election years ending in four (2004, 1984, 1964, 1944, 1924, and 1904) the S&P 500 averaged a full-year gain of 14%.

 Decennial Cycle: Average annual change in the DJIA (1881-2024).

The 5th year is by far the best year of the decennial cycle. In the Dow Jones Industrial Average out of the last 14 "5th years", 12 were up averaging a return of 26% per year. The only two 5th years that have ever been negative in the history of the DJIA were 2005 (-0.61%) and 2015 (-2.2%).

See also:

Jeffrey A. Hirsch (2011) - S&P 500 Projection Chart from 2009 to 2025. 

TPR - Seasonality.

S&P 500 Election Year Pattern during Fourth Years of a Decade, 1904 - 2024

Seasonal Pattern of the S&P 500 in U.S. Election Years during Fourth Years of a Decade (1904-2024): Composite Line of Election Years (1904, 1924, 1944, 1964, 1984, and 2004; based on daily closes from Stooq) vs. S&P 500 Performance from January 1 to September 27, 2024 (y-axis scale: percentages).

Same values with different scaling of the y-axis.

See also:

Wayne Whaley (September 21, 2024) - S&P 500 in Q4 After New 12-Month High in September.

Tom McClellan (March 29, 2024) - Crude Oil's 10-Year Leading Indication for US Stock Market.

Jeffrey A. Hirsch (2020) - Election-Year October Market Performance Volatile since 1950.

2016 - Presidential Cycle - Seasonal Cycle - Decennial Cycle of DJIA — January 5, 2016.
Jeffrey A. Hirsch (2011) - S&P 500 Projection Chart from 2009 to 2025.