In early part of October, on October 9 to be precise, the stock market made its low as predicted by Demark Analytics, just as it had done in 1929, said Thomas Demark of Demark Analytics. The market was expected to rally 12.6 percent, identical to the rally in 1929, he added.
Asked if the markets were heading for a crash similar to the one in 1929, Demark said when the market made its high on September 3 in 1929, there were 23 subsequent trading days where the Dow Jones industrial average had a short-term bottom. 23 days aligns with the low end on Monday and subsequent to that there was a four-day rally.
Then the market unraveled and went down 48 percent. The markets are at that inflection point. Everything is aligned at this point though the next 2-3 days are extremely critical. Analyzing both the minutia and the long-term, for example, if the markets close lower today and there’s a weak opening tomorrow, which is followed by weak trading, then possibly the markets are going to unravel quickly regardless of what the news are on that day, Tom noted.
Asked if investors should hold their positions and buy on dips, or should they be selling everything, Demark answered in the negative. The market was expected to top on January 15th, but it actually topped on January 14th – the S&P topped on January 14th, and the Dow Jones actually topped on December 31st. That’s being considered as the reference by Demark Analytics – the previous data of 23 days. The markets have already participated in 23 days of decline and that sequence is going to be extremely important, Tom said.
Asked to comment on the downside risks, Tom said back in 1987 they had predicted the markets to top off approximately 62 percent from the August 25th intraday high at that time. The markets (S&P 500) went down to approximately 1,600 on October 20.
Again on March 25, 2000, the S&P 500 was in the 1,520-1,540 range, and a correction of about 60 percent was expected. The actual low was hit on Sep 21st with the correction coming right to the tick of their 61.2 percent projection. If the market does unravel now, there could be a 60 percent correction of the 40 percent off the high, he concluded.
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Hi Uli — I’ve been a big fan for a long time.
I’m curious, this posting is kind of a break-away from your typical commentary. With all the market timers and prognosticators and “doom & gloom” predictors, what provided the impetus to make you want to feature THIS particular piece — as opposed to the legion of other opinions in that sample space?
Best regards, and again, thanks so much for your work and contributions.
— Daniel
Hello Daniel,
Actually, one of my readers provided the link to that story, and I found it worthwhile to share, if for no other reason than to shake up investor complacency. I believe that a pullback of that magnitude will occur, but the timing of it is the unknown. However, as the in the past, should my Domestic TTI break its long-term trend line to the downside, watch out below. All the artificial propping up of the markets in the past will come home to roost eventually.
Ulli…