DeMark Says S&P 500 Failure to Show ‘Vigor’ Spurs ConcernNikolaj Gammeltoft and Adam Johnson
The failure of the Standard & Poor’s 500 Index to keep rising after gaining 2 percent on Oct. 18 may mean it’s poised to retreat, according to Tom DeMark, the creator of indicators to show turning points in markets.
DeMark, whose prediction last month that the S&P 500’s decline would stop at 1,076 proved prescient when the index bottomed at 1,074.77, said he’s uncertain about the direction of the market now. Two days ago, he said the index might climb as high as 1,254 before falling as much as 5.6 percent.
“It’s disconcerting the fact that the market had three attempts these past four to five trading days, and none of the times it could prove itself that it had the vigor to move higher,” DeMark, an adviser to SAC Capital Advisors Inc.’s Steven A. Cohen, said during an interview today. “The market should have followed through after that big move two days ago, and it failed. And because it failed, it made us a little uncertain about the near-term direction.”
DeMark spoke during an interview on Bloomberg Television’s “Street Smart,” hosted by Lisa Murphy and Adam Johnson.
The S&P 500 rose 0.5 percent to 1,215.39 at 4 p.m. New York time, after falling as much as 1 percent and rallying 0.8 percent earlier. It lost 1.3 percent yesterday.
DeMark said on Oct. 18 that the S&P 500 would produce a sell signal by finishing above its Oct. 12 close of 1,207.25, marking the ninth consecutive day that the benchmark exceeded its final price four days earlier. The signal would be “perfected” and create a “preamble” to a peak above 1,250 by closing over 1,224.58. Both levels were surpassed when the gauge ended the day at 1,225.38.
When the index declined as low as 1,206.31 the next day, it was an indication that momentum was waning, according to DeMark, who has spent more than 40 years developing indicators with names like “sequential” and “countdown.”
“Near-term, the market is in a stationary trading range,” DeMark said today. “I am concerned that we may go down for a period of time and then reset.”
The benchmark gauge for U.S. equities jumped 11 percent in the nine days ended Oct. 14, the biggest advance since March 2009. The rebound brought the gauge close to the top of a price range between 1,074.77 and 1,230.71, where it’s traded for more than two months. The S&P 500 will probably rebound before reaching its Oct. 4 low of 1,074.77, DeMark said.
“When you get that much movement to the upside, it takes a while to dissipate, he said. ‘‘Worst case, we go down maybe 40 points and then try again.’’
DeMark provided consulting to hedge funds including George Soros’s Soros Fund Management LLC and Leon Cooperman’s Omega Advisors Inc. Advisors Inc. He said during an interview on Aug. 16 that some European banks are ‘‘bottoming right now” and companies such as Societe Generale SA, BNP Paribas SA, UBS AG and Credit Agricole SA “look like buys.”
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