DeMark Says "Sell China, The Trend Is About To End"

Tyler Durden's picture


We noted last week the coincidental surge in China's currency and stock market (bettering US equities for 2014) after they quietly unveiled QE-lite, but, as Bloomberg reports, Tom DeMark says "selling into strength is now recommended," with losses expected over the next six months. This follows his prediction from June that China's Shanghai Composite was due for a recovery, presaging a 16% rise. With last night's hint of China's credit impulse fading and CNY now recoupled with its fixing, perhaps he is right that the short-term catalysts for gains are exhausted. As DeMark concludes, "the trend is your friend until the trend is about to end."


A reminder of the driver of China's recent strength...


As Bloomberg reports,

The Shanghai Composite Index will probably end its world-beating rally within days and fall about 10 percent, said Tom DeMark, the developer of market-timing indicators who predicted the gauge’s peak last year.


...poised to erase those gains and drop below this year’s intraday low of 1,974.38.



“Selling into strength now is recommended,” wrote DeMark, the founder of DeMark Analytics LLC in Scottsdale, Arizona, who has spent more than 40 years developing indicators to identify market turning points. “The trend is your friend until the trend is about to end.”

DeMark has had a good year in China...

DeMark’s prediction in February 2013 that the Shanghai Composite would retreat came a day before the index began an almost 20 percent tumble from a nine-month high of 2,434.48.


His prediction on June 21, 2013 that the stock gauge was poised for a recovery presaged a 16 percent advance from its closing low on June 27 through mid-September.

“It is always best to announce a top/bottom before it might occur so one is able to sell strength or buy weakness,” DeMark wrote.

*  *  *

Perhaps the market senses the hangover from China's huge credit impulse is coming...

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Tue, 08/05/2014 - 14:42 | 5050259 zorba THE GREEK
zorba THE GREEK's picture

If we sell CHINA what will we eat off of, paper plates?

Tue, 08/05/2014 - 14:43 | 5050272 Say What Again
Say What Again's picture

Its nice to know that someone is telling me when to sell.  After 5 years of Fed imposed insanity, I forgot how to sell.

Tue, 08/05/2014 - 14:51 | 5050336 strannick
strannick's picture

Sell China and buy what, America?

Tue, 08/05/2014 - 15:04 | 5050429 tradingdaze
tradingdaze's picture

I bought a time-share in Gaza.

Tue, 08/05/2014 - 15:09 | 5050463 nidaar
nidaar's picture

Sell China buy Hong Kong!

Wed, 08/06/2014 - 08:38 | 5053255 marathonman
marathonman's picture

Buy when there's blood in the streets....

Tue, 08/05/2014 - 15:15 | 5050511 drinkin koolaid
drinkin koolaid's picture

Five words for you -- junk bonds to the moon!!!!!!!!!!!!!!!!!!!

Tue, 08/05/2014 - 15:09 | 5050473 teslaberry
teslaberry's picture

dude, i have plastic plates. really nice plastic  like you wouldn't believe.

Tue, 08/05/2014 - 14:46 | 5050261 ebworthen
ebworthen's picture


Rick Santelli suggesting that the drop in U.S. markets due to the Non-Manufacturing ISM blowout, which means the FED has to stick with tapering.

Not to mention there hasn't been a real correction in how many years?

"Markets getting crushed!" is -1% in the new abnormal.

Tue, 08/05/2014 - 14:58 | 5050378 Dr. Engali
Dr. Engali's picture

Have you ever seen crude go down on "the eve of war"? Me neither.... the "Russian invasion" is convenient excuse for the fed to let some air out of this "market". 

Tue, 08/05/2014 - 14:43 | 5050271 SAT 800
SAT 800's picture

Very wise; I like his attitude and conclusion. If you are at a profit in your Far East portfolio take it and sit on it.

Tue, 08/05/2014 - 14:44 | 5050275 AdvancingTime
AdvancingTime's picture

The debate continues as to how stable china really is. Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need. Like a plane on autopilot China continued in the direction it had been on.

Now China finds itself in a credit trap. For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.


Tue, 08/05/2014 - 14:45 | 5050283 SAT 800
SAT 800's picture

I like this DeMark guy; I think I'll look up his website and see what he has to say.

Tue, 08/05/2014 - 16:01 | 5050725 what's that smell
what's that smell's picture

does deMark want to stomp the muppets?

is he making a market in china-centric puts and calls?....swaps and protection?

muppets beware! there's a deMark stalking about.

Tue, 08/05/2014 - 14:54 | 5050360 geno-econ
geno-econ's picture

Does Mike Holland, another China hawk, argree ?  Where in the world will China be able to sell all those manufactured consumer goods when the Fed increwses interest rates ?  Certainly not Russia, EU or Japan

Tue, 08/05/2014 - 14:56 | 5050368 malek
malek's picture

Sitting in the US house of cards: "Look over there, their thing is going to collapse any day now!"

Tue, 08/05/2014 - 15:01 | 5050395 pragmatic hobo
pragmatic hobo's picture

china ... where math does not apply ...

Tue, 08/05/2014 - 15:07 | 5050450 drinkin koolaid
drinkin koolaid's picture

Wrong again Demark idiot.

Tue, 08/05/2014 - 15:10 | 5050474 gdiamond22
gdiamond22's picture

Kind of like he said there will be a 87 like crash when the SPX was at 1800 earlier this year...didnt work out so well 

Tue, 08/05/2014 - 15:16 | 5050527 syntaxterror
syntaxterror's picture

China can build another 500 or so empty cities before this motherfuckers goes boom. Tread carefully.

Tue, 08/05/2014 - 15:26 | 5050580 PennsylvaniaDutch
Tue, 08/05/2014 - 17:50 | 5051251 potato
potato's picture

Tom DeMark is one of the best ones out there. Everyone here just wants to get on the hate train, no matter what it is.

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