Tom DeMark: A 11% Drop In The Market Is Imminent

Tyler Durden's picture

Tom DeMark, whose Sequential and Combo indicators are among the most used indicators by professional technicians and chartists on Wall Street, is out with some chilling words overnight. The Market Studies LLC president told Bloomberg that U.S. stocks are within a week of “a
significant market top” that is likely to precede a drop of at
least 11 percent in the Standard & Poor’s 500 Index
. “I’m pretty confident that in one to two weeks, the market
will be in a descent,” said DeMark, founder and chief executive
officer of Market Studies LLC. “It could be pretty sharp.” And since the Hindenburg Omen in mid-August was prevented from taking its share of scalps only by dint of the Chairman's Woods Hole speech a week later which set off the market on the biggest melt up since... well August of 2009, we wonder if the Fed's Open Market Operations desk will take this warning as a leading indicator to start spreading rumors of another QE expansion. Keep a close eye on those Jon Hilsenrath "leaks."

From Bloomberg:

DeMark’s forecast follows projections from Wall Street strategists that the S&P 500 will climb to 1,384, an annual gain of 10 percent, through the end of the year, according to the average of 12 estimates in a Bloomberg survey. Short selling of companies in the index has fallen to the lowest level in a year, according to Data Explorers, a New York-based research firm.

Steven A. Cohen, founder of Stamford, Connecticut-based SAC Capital Advisors LP, which manages $12 billion, and John H. Burbank, founder of San Francisco-based Passport Capital LLC, which manages $4.2 billion, are partners in Market Studies, DeMark said. The firm has its headquarters near Scottsdale, Arizona.

On a weekly basis, the two indicators signaled on Jan. 14 that a reversal is imminent as the S&P 500 closed at its highest level since August 2008. DeMark expects a decline of at least 11 percent because his work shows that markets move in increments of 5.56 percent, he said. Assuming a drop twice that size is “a conservative estimate,” he said.

The indicators are based on comparisons of the current closing level of the index with closing and intraday levels over previous periods. The reading Jan. 14 was the first signal of a reversal in the S&P 500 since March 2009, when the indicators showed a rebound was imminent, he said. That month the S&P 500 fell to a 12-year low from which it has rebounded more than 90 percent.

All that said in US central planning market, stocks drop you.

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Thomas's picture

Short timescale predictions are usually wrong.

monkeyfaction's picture

This will happen 1 second after my put options expire worthless on Friday.

dracos_ghost's picture

+1. I hear you on that one.


Starve the market. Play Online Poker!!!!

theXman's picture

Seriously, I think you are right. Selloff should start next week or even Friday.

Looks to me that market is drawing a (at least) near-term top on the chart. Today's action is just a warning shot. Expect a strong bounce either tomorrow or Friday. Then the flood gate will be open

Turd Ferguson's picture

Hey, I found this cool interview with The Great Hugh Hendry. Worth watching:

Turd Ferguson's picture

Yes, anything from Hugh Hendry is definitely junk.

Junk you, too, douchebag.

Snidley Whipsnae's picture

Take it easy Turd...or, as my dad used to say 'don't let the sons of bitches get you down'.

Hendry is sharp and you have a great site going...What does the azz hat that junked you have going?...Probably a corner in his/her parent's basement. :)

Keep the faith, keep up your good works!

Turd Ferguson's picture

Thanks, Snid.

It would be fun to see tyler add some type of positive feedback button so that one coiuld measure the perceived "quality" of each comment.

Snidley Whipsnae's picture

I believe that at times we can measure how close we are to the truth by the number of 'negs' our posts receive.

Of course there are outliers to every rule of thumb... like Harry Wanker. :)

TruthInSunshine's picture

Speaking of Harry Wanker, who are the dickheads junking Turd Ferguson?

RockyRacoon's picture

It's the 2011s, man.   Junk is the new thumbs-up.  Admirers all.

Freddie's picture

I think Turd has created the catch phrase for 2011:

"Junk you, too, douchebag."


prophet's picture

Your contributions demonstrate vision, leadership, quality, and value.

Freddie's picture

LOL!  Maybe he does not like your hat.

DaveyJones's picture

I predict 12.25% and if that's wrong, I predict everything will eventually go to hell.

101 years and counting's picture

only 11%?  that can be done in 10 minutes.


Eric Cartman's picture

It can, but you have to be there to exit your shorts because it can correct just as fast. lol. flash crash, flash rebound then melt up...


better get a little dip while you still can.

terryg999's picture

Maybe it will put some volatility in ES that I can get some decent trades out of...

John Law Lives's picture

The PPT has been put on notice.  Imagine what would happen to the NASDAQ if Steve Jobs saw his health decline to the point that he couldn't work.

flacon's picture

"work" is a subjective term. 

Common_Cents22's picture

Ever see "Weekend at Bernies"?   Jobs will always be around.

Moonrajah's picture

Personally, I think the recent AMC TV series "The Walking Dead" is a better example. After all, we already see a lot of Jobs-followers either in products or in stocks - looks to me that he must've bitten them sometime before and now the disease (applefication of the brain) is widespread.

Vergeltung's picture

will they let it fail? after all they've done to date. why should they stop now?

RobotTrader's picture

As long as gold keeps rising, a 11% market drop is unlikely.

However, a correction could be close, as the XRT and XLF are now starting to underperform for the first time in a long time.

lieutenantjohnchard's picture

hey catfish mouth. where's that zlc chart that you slapped up last week mocking the bears? now you're calling for a potential correction at the same time you're braying that "a market drop is unlikely."

bluemaster's picture

"most used indicators by professional"   Robo how long pro can survive trading futures using indicators :-)    


monthly chart for Emini , DAX and ASX .


Market will drop when most of us are "long" and CNBC,WSJ and rest of Gestapo media

say blue sky is limit .

fiddler_on_the_roof's picture

Robo is right about XRT showing weak hands. I am out of S&P and now am short some retail/restaurant stocks since 2 weeks and they have already dropped 10% since then. I expect S&P to drop now.

HarryWanger's picture

Agreed that a slight 3-4% correction might be looming here. I said last week I thought once we hit 1300 we'd see the pull back. 11% is ridiculous. The pull back should take us to 1250 level which is where the buyers will flood back in.

The Axe's picture

Please, impossible while Sack has a bloomberg and a printing press. The market is broken, thus it does not and will not function as market. It will be pushed up and up until Ben comes out on to the carrier deck and declares victory.

unwashedmass's picture


didn't you see the picture of their office in the Times? They don't have a bloomberg news terminal.

TradingJoe's picture

Physical PMs and Puts! Rest is History!

pat53's picture

LOL... another top caller, not a chance SPX 1350+, then maybe a small correction

tmosley's picture

Wow, a top calling troll calling for a top in something other than PMs.

How extraordinary.

goldmiddelfinger's picture

A shit snuffling troll calling TD a troll? You FOOL !!! Beware fools

tmosley's picture

Tyler didn't write that article.

Also, you're the fool that sold his gold for a 100% profit when he should have gotten a 1000% profit.  

goldmiddelfinger's picture

Silver coins for 100% you FOOL. Not gold.

135% AGQ 7 weeks up to 12/07/10. How about you, You bootlicking moron?


The Rock's picture

Maybe he meant the other TD (Tom DeMark), the author.  :-)

billhilly's picture

Blah, blah, blah.  If I had a dime for every "imminent" market drop I'd be a richer man.  Talk about "hopium", I've been waiting for this for 6 months now and am beginning to really believe that the market may NEVER EVER go down again.  Watching my shorts get soiled day after day after freakin day is the ultimate humbling/maddening experience...fookin FED!

The Rock's picture

I've been waiting for almost 2 fucking years now.

SheepDog-One's picture

Just what they want everyone to think, it can never go down again. Good luck to anyone believing liars lies about altered laws of physics.

Sean7k's picture

When you're printing money, it has to flow somewhere. Our job is to figure out where the flow will pool, that is, if your greed drives you to bet against every insider in the market, you have to find the streams of credit.

Will it be bonds? Will it be stocks? Will it be PM's? Can they head fake here and head fake there and scalp your bets? 

Once all the rules are broken, the chance percentages rage. 

Possibly, for once in a long time, it may just be dangerous to be a small speculator. Regardless of experience, once you sail into new waters, without charts, the shoals can capture your every dime.

The Rock's picture

Yeah right, every time "they" drag out Faber, Fleckenstein, et al, the market suckers in the shorts and melts up. Where's Taleb?

oh_bama's picture

I am hoping a 11% dip, then I can buy the f**king dip!!

bunkermeatheadprogeny's picture

Sectors that lead rallies typically lead the sharp declines. The financials led this rally due to QE2, if financials do not lead an overall market decline, it will show just how fucked up this faux rally has been.

max2205's picture

Ben has to have the 5 min spy chart up on his laptop. They hit right at sell signals. Chartists are losing their minds