MW Tom DeMark says the stock market is nearing a top as he draws 1929 parallels
By Steve Goldstein
Award-winning technical analyst is wary about Nvidia heading into next week's earnings
The stock market has been charging along for months.
Perhaps not for long. Tom DeMark, an award-winning technical analyst who has advised investors including Paul Tudor Jones, Leon Cooperman and Steven A. Cohen, says that a top is likely imminent.
DeMark focuses on trend exhaustion and his mantra is that markets top on good news and bottom on bad news. In particular he focuses on a string of 9 and 13 daily or weekly moves, which don't have to be consecutive but do have to be better, or worse, than four sessions ago in the 9 model and two sessions ago in the 13 model. See DeMark's analysis on his website Symbolik.
In an email to MarketWatch, DeMark says the Dow Jones Industrial Average, from its Dec. 1914 low to its Sept. 1929 high, rallied 624%. From the 2009 low to this week's high, the Dow has rallied 587%.
He says the Dow has recorded similar daily, weekly, and monthly price profiles to that of the earlier period.
DeMark says an optimistic upside potential would be 47,045. The Dow DJIA closed Thursday at 43,751.
He also makes comparisons to a more recent rally - the recent multi-month advance from late 2022 has a potential upside price projection identical to the move from the 2020 to early 2022.
As for the S&P 500 SPX, he says the monthly model countdown is at either 12 or 13, and says the comparable upside potential is 6,118. The S&P 500 closed Thursday at 5,949, as it hasn't been able to hold onto gains above the 6,000 mark.
On daily charts, the Dow is at countdown 11 and the S&P is also at 11, says DeMark - so basically requiring two new all-time highs to trigger a sell.
That could lead to a standard 5% to 10% pullback or what he calls a full-fledged breakdown.
"The past two weeks' rally has been on stilts and a sudden suspension of buying-even without selling pressure- could undercut the rally and transform into a sellers' market. Granted good news could unlikely extend into inauguration but, at any time, once buying interest is interrupted, subsequent rallies should be short lived," says DeMark.
He's also wary about Nvidia $(NVDA)$, the key microchip maker driving the AI revolution that reports results next week.
He says it's currently at countdown 12 and a new closing high would complete its rally. He says the upside potential is $154.50, while the downside risk "could be significant."
-Steve Goldstein
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(END) Dow Jones Newswires
November 15, 2024 04:02 ET (09:02 GMT)
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