US Stock markets may soon witness a sharp downturn, according to veteran technical analyst Tom DeMark, as per a report by Bloomberg. He cautions that the recent rally in the S&P 500 Index could be for a short duration and may give way to a bear market in the coming months.
Warning signs indicating for US rally
DeMark, who is known for accurately calling market tops and bottoms, stated that technical indicators are indicating red. He thinks the S&P 500 might fall to its April low of 4,853. This move would indicate a decline of over 20% from its February high, officially pushing it into bear market territory. ”A top is imminent. Too much technical damage has been done,” he told Bloomberg. He added that even a small change in global trade sentiment could spark a remarkable decline in equities.
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DeMark uses a study called the ”countdown” method, which keeps track of price movements for specific time intervals. When a certain pattern appears nine times, it often indicates trend exhaustion. As of Thursday, the S&P has recorded seven such counts. If the index makes two more closing highs, it may signal that a strong reversal is coming, he explained.
Despite the index registering its longest winning streak since 2004, DeMark states that the recovery has been false. He stated to Bloomberg that markets typically bottom when the news is worst and panic is high and not on good news.
DeMark, whose clients include hedge fund giants like Steve Cohen and Paul Tudor Jones, has made his career by pointing out trend reversals. His latest call indicates investors should continue to be alert, especially with volatility looming in the upcoming months.
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