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.

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Wed, 02/05/2014 - 17:00 | 4405411 Stoploss
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Wed, 02/05/2014 - 17:10 | 4405452 BandGap
BandGap's picture

If the US gets kicked that hard we aren't getting up for awhile.

We need Jan, Jayce and Blip on this one.

Wed, 02/05/2014 - 17:18 | 4405488 Divided States ...
Divided States of America's picture

So DeMark is saying that if the markets rebound over the next few days, he will get extremely bearish and expect a 48% drop???

what happens if it keeps tanking over the next few days, does that mean he isnt bearish anymore because the 23 day alignment dont match up???

Wed, 02/05/2014 - 17:26 | 4405530 dontgoforit
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Damn near a mirror image from '29 to now......whoa, if history repeats we're in for a helluva ride.

Wed, 02/05/2014 - 17:35 | 4405574 Levadiakos
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Just hope Jamie's bonus is secure

Wed, 02/05/2014 - 21:48 | 4406467 let-them-eat-cake
let-them-eat-cake's picture

Does the pope shit in the woods?

Wed, 02/05/2014 - 23:57 | 4406806 TrustbutVerify
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I've never read that he has.

Wed, 02/05/2014 - 22:37 | 4406612 moneybots
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"Damn near a mirror image from '29 to now......whoa, if history repeats we're in for a helluva ride."


Three peaks and a domed top.  The pattern itself has repeated other than 1929 and now.  The pattern itself does not mean a 1929 90% decline.


Wed, 02/05/2014 - 17:10 | 4405456 nuclearsquid
nuclearsquid's picture

This isn't the cutting edge financial commentary I have come to expect from ZH.  

Wed, 02/05/2014 - 23:40 | 4406777 Wahooo
Wahooo's picture

No kidding. According to this guy the market will go down 5 plus percent. We're already there, so what now?

Wed, 02/05/2014 - 17:14 | 4405484 Carpenter1
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In 1929 the world wasn't 1/1000th as messed up as it is now. This one will be like no other before, FED or no FED.

Wed, 02/05/2014 - 17:02 | 4405413 HyBrasilian
HyBrasilian's picture

Fuck these TA fucks... [Are you fucking kidding me?]

Wed, 02/05/2014 - 17:09 | 4405446 Groundhog Day
Groundhog Day's picture

You just the PPT exactly when to inject the liquidity.  Now we know exactly when to go long.  What a joke

Wed, 02/05/2014 - 17:12 | 4405460 HyBrasilian
HyBrasilian's picture

Yellen hasn't gotten warm in [his] seat yet [because it now requires 3 to warm up, & an even FATTER finger friendly Ctrl+P button size to push]...

Wed, 02/05/2014 - 17:01 | 4405415 ejmoosa
ejmoosa's picture

It's gonna slump until the economy really starts to get better, of it's OWN accord.


Because the bullshit has lost it's deceptive allure.

Wed, 02/05/2014 - 17:06 | 4405440 assistedliving
assistedliving's picture

i caught the tale end of that on CNBS.  he was about to mention something about Ag but got cut-off.  anybody catch it or know his research?



Wed, 02/05/2014 - 17:10 | 4405455 The.Harmless.Who
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but... it will be different this time! 


(new normal etc.. and oh!  there's facebook and twitter - and they will save the world with their YoY ZERO cash)





Wed, 02/05/2014 - 17:10 | 4405459 CheapBastard
CheapBastard's picture

Oh, woe is me! I'm anxious to see if housing plunges in sync with stocks. It's been slowing drifting lower but no acute moves ...yet.

Wed, 02/05/2014 - 17:11 | 4405466 gwar5
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"However, there is a much more concerning and repetitive cycle that BofAML notes suggests weakness in US equity markets through September...."


More like September, 2034.


Wed, 02/05/2014 - 17:11 | 4405468 pendragon
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the 4 most expensive words in the english language "this time it's different"

Wed, 02/05/2014 - 17:22 | 4405520 Hughing
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Stocks will slump until Janet pumps

Wed, 02/05/2014 - 17:54 | 4405585 bobert727
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I think your looking at the wrong chart when saying "stock will slump through September". The September low you see is from the 1929 chart.  If we are following that pattern the slump is coming much sooner than that.

Like early to mid March.....or in the next 30 days!!!

Look at the 23 day comparison.  If we are following the first 23 day drop, then there should be a bounce and then a sharp decline ending at the end of this month, February and into early March.  Based on the chart comparison, the S&P should move down to 1500-1550 by the end of the month.

That will sure make the bulls shit their pants.



Wed, 02/05/2014 - 18:54 | 4405866 Uber Vandal
Uber Vandal's picture

Probably March 4 to March 15, ides of March and all, and that nifty article from October, 2012 that mentioned all hell breaking loose on March 4, 2014.

I guess we will find out in about a month or so.


Wed, 02/05/2014 - 17:40 | 4405597 Zero guest
Zero guest's picture

It's not 1929. It is 1916 or  1973.  


If you want to scare sombody do an overlay of the 1966 to 1974 bear market or the 1904 to 1921 period to our market from 2000.  


The market may crash but not because we are at the 1929 point.                                                                             

Wed, 02/05/2014 - 17:49 | 4405627 beaker
beaker's picture

I've been following Tom DeMark since the 80's. He is one of the best technical analysts out there and has the $ to prove it. I would not bet against him...

Wed, 02/05/2014 - 21:52 | 4406483 BeanusCountus
BeanusCountus's picture

Glad to hear you say that youve been following him for a while and hes been accurate. Honestly though, i have struggled to follow any of the technical people over the years. Always seemed like good predictors of stuff after it happened. These days, I dont dismiss them as much as in the past because it seems like the trading programs (which i hate) use the same mathematical comps as a foundation of how to trade millions of shares. Daily. Not hoping he's right, but I have to say it fits with my views on all the problems that are the Fundamentals of what is going on today. Biggest, of course, is the unprecented printing of money by almost every central bank around the globe. In unison. Only problem with my thinking, and his, is that Yellen could come out tomorrow and announce a new program that sends the markets skyrocketing in a second. Charts cant predict that. And neither can I.

Wed, 02/05/2014 - 17:48 | 4405630 halfawake
halfawake's picture

ug with these f-ing analogs. you can analog anything with anything! i can analog the intensity of my craps to this market if i wanted. yeesh. how many mbs/bills was the fed buying in 1929??

Wed, 02/05/2014 - 19:04 | 4405900 forwardho
forwardho's picture

Re; how many mbs/bills was the fed buying in 1929??

Agree, Show me the chart that takes into account the historical effect of TARP, QE 1-4,  Always, We are reminded, past performance does not indicate future... Yet everyday we are treated to a melange of charts showing just that.

To boldly go where no man has gone before.

Could anyone have forseen a time when the fed along with it's international cohorts would artificially levitate the markets for years on end? In my wildest nightmares I could not have forseen the current manipulation and false hope that exists today.

Around the world the production of value is crashing, yet the band plays on.

Wed, 02/05/2014 - 22:42 | 4406639 moneybots
moneybots's picture

"ug with these f-ing analogs. you can analog anything with anything! i can analog the intensity of my craps to this market if i wanted. yeesh. how many mbs/bills was the fed buying in 1929??"


Demark is comparing pattern to pattern.  Three peaks and a domed house.

The pattern does not mean it is 1929 again, just that the three peaks pattern is repeating, as it has done several times before.

Wed, 02/05/2014 - 17:54 | 4405649 Spungo
Spungo's picture

Trying to pinpoint the daily movement of the market = fail. That's like saying last year's Feb 6 was colder than Feb 5 therefore I think this year's Feb 6 will be colder than Feb 5. Predictions over a shorter time span are much less accurate. 

Wed, 02/05/2014 - 21:38 | 4406441 tbone654
tbone654's picture

Yes...  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%.

It's like when they tell you "most auto accidents occur within one mile of your home"...  No shit... your there at least twice on every trip you take...

Or even better "In baseball, pithers give up more runs it the first inning, than any other inning"...  Maybe it's because if your bad enough you don't see some of the 2nd innings... 

Yikes...  Ever hear of the "trend is your friend"?  I'm agreeing with you...


Wed, 02/05/2014 - 17:56 | 4405661 homiegot
homiegot's picture

Must find tall building...

Wed, 02/05/2014 - 18:33 | 4405787 Dr. Engali
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As compelling as this story is, I simply can't believe that they are going to let it all collapse with the first woman ever,,,, ever chairing the fed. After all we elected the first black president (what happened to his white half?), and soon we will 'elect' our first female president (her sex is questionable). After all we are a nation that prides itself on its diversity. Old Yeller will print like a moe foe before they let it all fall. The only way I see them let it happen is if there is a false flag. Which btw is the scenario I think will play out.

Wed, 02/05/2014 - 18:51 | 4405859 Playtime's Over
Playtime&#039;s Over's picture

Are you kidding. America has no stomach for another "firster" President after this one. In fact there may not be another almost black president for a 100 years.  He's been THAT good for America.

Wed, 02/05/2014 - 22:00 | 4405976 Dr. Engali
Dr. Engali's picture

Don't fall under the illusion that we actually elect these people. We get official choices to select from. Both of whom represent the same people, and it's not us.

Wed, 02/05/2014 - 19:14 | 4405944 Sufiy
Sufiy's picture

CNBC: Thomas Demark Calls For Risk of 60% Crash In S&P 500

Thomas Demark is calling that the next two - three days will be critical and if the markets go down they can unravel very quickly. If today's weak ADP report can be taken as any guidance the coming up Jobs Report can be weak as well. We think that his call is very extreme, but Taper Pause is becoming the reality with every sell off in the market. Thanks to Bernanke, Janet Yellen has her FED Chair Crisis right at the start of her reign. Gold is fighting the gravity and market manipulators at the $1270 level and once it will close above it the mother of short squeeze in Gold will arrive.

Wed, 02/05/2014 - 20:47 | 4406264 Cyclerider
Cyclerider's picture

The 23-day recent analog is very deceptive:

The 23-day drop in 1929 was about 15%.

The 23-day drop in 2014 is about 5% or 1/3 of the 1929 drop.

If the scale on the right wasn't manipulated to make the graphs line up so conveniently, it would paint a very different picture.

Wed, 02/05/2014 - 22:45 | 4406644 moneybots
moneybots's picture

"If the scale on the right wasn't manipulated to make the graphs line up so conveniently, it would paint a very different picture."


It is the pattern that lines up.  It is not about the scale, it is about the pattern.

Thu, 02/06/2014 - 00:25 | 4406855 assistedliving
assistedliving's picture

Liesman asked him about his track record...thought the guy was going to choke

Thu, 02/06/2014 - 02:30 | 4407025 Cdn1
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Thu, 02/06/2014 - 04:40 | 4407129 Escapeclaws
Escapeclaws's picture

You can fit the graph shown up to today's date with a high degree polynomial curve, say 10th degree or 11th degree. Say the 10th degree, when extended beyond the current date says the market is going down. Then the 11th degree will say it's going up, with all odd degrees predicting up and all even degrees predicting down. Go figure.

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