DeMark's Dire Forecast And Why Cycles Suggest Stocks Slump Until September

Tyler Durden's picture

Tom DeMark's analogs - that we have been discussing for the last few weeks - have received some attention today as his medium- and short-term echoes of 1929's crash continues to line up ominously. However, there is a much more concerning and repetitive cycle that BofAML notes suggests weakness in US equity markets through September.

 

DeMark's longer-term analog:

 

 

And the 23-day recent analog...

 

"23 days aligns with the low end on Monday. And subsequent to that, we had a four-day rally, and then the market unraveled — went down 48%. We are currently at that inflection point. Like I said, so far, everything is aligned. We think the next two to three days are extremely critical."

 

But as BofAML notes,

Presidential Cycle Year 2 weaker into the mid-term election ahead

2014 is the second year of the Presidential Cycle. Year 2 is the second weakest year of the cycle and is up on average 4.5% (1.1% median return) for the year and up 57% of the time. If the US equity market follows the Presidential Cycle in 2014, there is a potential selling opportunity in April/May and a potential buying opportunity in September/October.

2014 is also Decennial Year 4 which also suggests weakness until Q4...

And of course - there's the January Effect...

January 2014 was down 3.56% and this flashes a negative signal for the January Barometer. Based on S&P 500 data going back to 1928, January is a good predictor of the year.

When January is up, the year is up 80% of the time with an average return of 13.0%. When January is down, the year is down 58% of the time and the S&P 500 has an average decline of 2.3%.

 

and as is clear - when January is down and in a Presidential Cycle Year 2  - it gets worse.