Ask Tom DeMark how confident he is about his most recent equity-market timing call and he will imply that it is almost a no-brainer from his perspective.
“I’ve been stubborn and obstinate about 3,907 since November,” DeMark told MarketWatch in an exclusive phone interview Thursday morning.
That figure represents where the market-timing expert expects the S&P 500 index
SPX,
to climb over the next two weeks, representing a further 5% surge for the broad-market benchmark before the end of the year.
The S&P 500 is already up 15% so far in 2020, the Dow Jones Industrial Average
DJIA,
has climbed more than 6%, while the Nasdaq Composite Index
COMP,
has soared nearly 42% thus far this year, after the indexes fell sharply in the spring when the coronavirus pandemic first caused the U.S. economy to slump.
But DeMark’s timing models suggest that there is more room to run in other benchmarks too.
He sees the SDPR S&P 500 ETF Trust
SPY,
,
referring to the popular S&P 500 exchange-traded fund known as the SPY after its ticker symbol, hitting 390.05, and the Nasdaq Composite topping out at 13,240 in the next half-month.
But there is a catch to that late-year equity surge. The technical analyst says that it is likely to represent a top for stocks and estimates that the S&P 500 in the first half of 2021 is likely to decline by 5% to 11%, based on his models and the natural tendencies of assets in a downtrend.
“That’s what our work suggests, confirming what the daily [and weekly trends are] going to do, indicating a potential top,” he told MarketWatch.
“It’s down severely in the first half [of 2021],” the research wrote.
Progress on another coronavirus fiscal aid package from Congress may help to initially propel stocks higher, but DeMark does not pay much attention to economic data or company valuations.
“I don’t follow fundamentals,” DeMark said. He quipped that he got the “C” and the “F” but he never got the “A” in CFA, referring to the Chartered Financial Analyst designation, or CFA, common among investment managers on Wall Street.
Still, DeMark’s popularity stems from his extremely technical approach to making his stock market calls, employing a momentum formula that compares closing levels of the S&P 500 with those from days and weeks earlier, among other complex indicators, to make his determinations.
He’s a relatively prominent fixture on Wall Street, CFA or not, and garners a certain amount of celebrity status advising the likes of hedge-fund luminaries George Soros, Stevie Cohen and a host of other financial hotshots.
Josh Brown, of Reformed Broker fame and CEO of Ritholtz Wealth Management, has described DeMark this way: “In a world where everyone wants to be a market timer, you could do much worse than follow DeMark’s calls.”
As for the rough sledding in the first half of 2021 that his models suggest, DeMark says that at one point you just exhaust the buyers.
“You want to sell into strength and buy into weakness,” he said. “Markets top not because of smart sellers but it’s because the exhaustion of the last buyer.”