The stock market’s steady ascent may soon hit a ceiling, warns award-winning technical analyst Tom DeMark, Market Watch reports.
Known for his expertise in identifying market tops and bottoms, DeMark has worked with legendary investors like Paul Tudor Jones, Leon Cooperman, and Steven A. Cohen. His latest analysis suggests the markets are nearing a pivotal moment, drawing comparisons to historic events like the 1929 crash.
DeMark’s analysis of market trends focuses on “exhaustion” patterns, using a proprietary system that tracks sequential price moves—commonly referred to as his 9 and 13 models. Markets tend to top during periods of optimism, DeMark notes, and current patterns bear a striking resemblance to past prelude-to-crisis scenarios.
He highlights the Dow Jones Industrial Average’s extraordinary rally since the 2009 low, which has surged 587%—similar to the 624% rally the Dow experienced from its December 1914 low to its September 1929 high. For the Dow, DeMark sees a possible upside target of 47,045, compared to its Thursday close of 43,751, but emphasizes that such gains may precede a pullback.
The S&P 500, which closed at 5,949 on Thursday, has also been unable to sustain levels above the 6,000 mark. DeMark notes that the index’s “countdown” on his monthly model has reached 12 or 13, a potential harbinger of a significant pullback or even a full-fledged breakdown. A similar countdown is evident on daily charts for both the Dow and the S&P 500, requiring just two more all-time highs to trigger a sell signal.
DeMark warns that the current market rally, which has unfolded over the past two weeks, appears fragile.
“The past two weeks’ rally has been on stilts,” he says.
DeMark added that even a temporary pause in buying could lead to a sharp reversal. While some further gains are possible in the short term, DeMark believes that once the buying momentum fades, subsequent rallies are unlikely to sustain their strength.
He predicts the market could experience a standard 5% to 10% correction or something more severe, depending on whether sentiment shifts abruptly.
DeMark also expressed caution regarding Nvidia, the semiconductor powerhouse that has been a major driver of the AI revolution. Nvidia, which reports earnings next week, is at a critical juncture, according to DeMark’s models. The stock is currently at countdown 12, and a new closing high would complete its rally. DeMark sees an upside potential of $154.50 but warns that downside risks “could be significant” if the stock fails to maintain its momentum.
Nvidia’s performance has been closely tied to the broader market rally, making its next move a potential bellwether for the technology sector and the stock market as a whole.
DeMark’s parallels to the 1929 market height are not made lightly. While markets have advanced strongly in recent months, driven by optimism surrounding technology and AI, the echoes of past peaks serve as a reminder of the cyclical nature of markets.
“Markets top on good news and bottom on bad news,” as DeMark often says.
He suggested that recent positive developments may paradoxically signal the end of the current rally.
