Wednesday, May 7, 2014

ImageImageRecapping Tom DeMark’s quick appearance on CNBC yesterday, the big takeaway is his reference to price and time for the Dow Industrials (DJI). On the top chart above, DeMark took the difference between the initial price rise from the March 6, 2009 low at 6627 to the first major peak in May 6, 2011 at 12,876. After the Dow sold off to his retracement targets, DeMark then added the difference (6249 Dow points) to the October 4, 2011 low at 10,404, and DeMark equates that to a potential top in the vicinity of 16,653. That’s the price component. 

The second chart from above demonstrates the time component. Since the 16,653 price objective is more or less met, he looked for a topping pattern similar the bottoming pattern back in the July 2011 – October 2011 by inverting the chart for that time period. The number of trading days of that mid-2010 bottoming process equated to “62 trading days” according to DeMark. By inverting the correction period in mid-2010 and comparing it to the Dow today, the patterns are similar and in the vicinity of the “62 trading days”. Furthermore, the pattern would be complete if the Dow made one more marginal high to that 16,660ish area and per DeMark, that should signal the next major move down. The CNBC video is here: http://video.cnbc.com/gallery/?video=3000271931

Janet Yellen will direct the markets today as she speaks to the Joint Economic Committee of Congress.


S&P 500 (SPX) SHORT TERM OUTLOOK: BEARISH

Switch back to neutral if SPX closes above 1884.75.

ImageAnother bearish price flip, except this time, the daily SPX timeframe also tagged along. 


S&P 500 (SPX) SHORT/INTERMEDIATE TERM OUTLOOK: BEARISH

Flip back to bearish if SPX closes above 1884.75, same as 4 hour chart.

ImageThe Nasdaq and the RUT have followed the SPX in initiating a new TD Buy Setup. If selling accelerates into a “9” count TD Buy Setup to coincide with the weekly charts, a bottom or an interim bottom for the oversold momentum stocks is probable, indicating the trading range has not gone away but expanded. 


S&P 500 (SPX) INTERMEDIATE/LONG TERM OUTLOOK: NEUTRAL

Back to bearish if, on May 9th, the SPX closes below 1815.69, or if both the Nasdaq and the RUT close below 3999.73 and 1111.44, respectively (updated May 5th).


S&P 500 (SPX) LONG TERM OUTLOOK: BULLISH

Flip to neutral if the SPX does not trade above 1897.28 during the month of May and closes below 1836.27 on May 30th, the 8 month MA. Alternatively, flip to neutral if SPX closes below 1782.59 on May 30th (updated May 5th).


 

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3 Responses to Wednesday, May 7, 2014

  1. sopriscap says:

    I was curious what your take was on DeMark’s appearance in respect to the size of his call. There was a piece in Bloomberg last week where he was calling for an 11% decline after an SPX close above 1891. In this clip the sense I get is that he is calling for a larger peak. Am I seeing something that is not there or his he making a big top call?

    • Art says:

      My feeling nothing has changed. Usually he gives a minimum of 5.5% drop, but this call is for 11%, with the assumption it is a minimum drop. Therefore, either way you look at it, it is still a major top.

  2. sopriscap says:

    I just noticed that he mentioned something about a 3 staged move higher with a pullback in between, an ABC, with equal up lengths, and took that to imply that he thought we were putting in the high from the move that began in ’09.

    Good to know that 11% would be his minimum.

    Thanks.

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