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