Market Timers' McClellan and DeMark Are Cautious on the S&P

Tom McClellan, who runs the McClellan Market Report, thinks the S&P will trade "violently sideways" for the next four months. He was featured on Bloomberg TV on 2/6/2012: McClellan Says U.S. Stocks May Trade Sideways Until June. He mentioned that the Eurodollar futures commercials COT (commitment of traders) chart from last year correlates almost perfectly with the S&P 500 today. For more info on this, read his "Chart in Focus" post from 5/27/2011: Commercial Traders Foretell Market’s Movements. The correlation correctly predicted that the S&P would peak in early June and bottom out in October. This is amazing. On 2/3/2012, before his Bloomberg appearance, McClellan released a new warning: Eurodollar COT Indication Calls For Big Stock Market Top Now.

Tom DeMark, creator of the DeMark Indicators, told Bloomberg TV on 2/6/2012 that his 1,342 target on the S&P has been reached, and to "go to cash". DeMark predicted on 12/5/2011 that the S&P would top out in December between 1,330 and 1,345. There were technical barriers above that it needed to fight first (200 day moving average, downtrend), so it took a little longer than expected. DeMark was right on direction, but two months late. The S&P closed at 1,257 on 12/5/2011 and 1,344 on 2/6/2012, which is a 6.9% gain in two months. He told Bloomberg's Adam Johnson a few days ago that the S&P could spike to 1,375 if there was a bullish catalyst (economic data, Greece deal, etc). Below is a chart of the S&P and RSI from June 2010. A trend break will be a nice short when it occurs. Recently the S&P pierced through the downtrend line from the 2007-2011 peaks. Watching to see if it holds. In conclusion, two well known market timers are getting cautious on the market here. Protect yourself!


$SPX with RSI (freestockcharts.com)

Comments

  1. I've never heard of McClellan before, but thanks for the link as I watched his interview. I'll have to wait and see if he knows what he's talking about. But I've been thinking about DeMark's approach to the markets. He talks of buyers being exhausted after a period of up days (I think 13 exhaustion days). But with so much money on the sidelines and improving economic data especially labor, I wonder if he is projecting his bearish predisposition on to the markets, as many more buyers could come back in. We won't be in this depressed economy forever, but the pessimistic mindset will be hard to shake off for most. 

    ReplyDelete
  2. I sub to McClellans free articles on his site. Or maybe it's decisionpoint. McClellan created the McClellan Oscilattor that I look at on stockkcharts.com. I want to know how the Euro COT predicts stock market moves one year in advance. DeMark says markets top on good news with a lack of buyers. So, I guess it depends if Central Bank liquidity and sideline money trumps good news being priced in.

    ReplyDelete

Post a Comment