A top for the Nasdaq and Dow could come as early as this week, strategist says

Tom DeMark, the award-winning technical strategist, thinks the Grinch may soon snatch some of the holiday cheer.

DeMark focuses on the number of days — which don’t have to be consecutive — that an asset sees a close lower than the low of two days prior. Subject to various conditions, when the countdown reaches 13, a buy signal is triggered. (The opposite is the case on the way up.) His broader observation is that markets bottom on bad news and top on good news. See DeMark’s analysis on his website Symbolik.com

In early October, DeMark, the founder and CEO of DeMark Analytics, told MarketWatch that the stock market was due a countertrend rally that would last three to four weeks. That rally did come, albeit a bit stronger, and longer, than he said — the S&P 500
SPX
is up about 12% from its October lows.

Now he says both the Nasdaq 100
QQQ
and the Dow Jones Industrial Average
DJIA
could top as early as this week. “The QQQ [Nasdaq 100 ETF] upside price projection is 399.45. In a perfect indicator laden world, the anticipated QQQ 13 sell countdown will appear on the high day when the QQQ upside price projection is also fulfilled. QQQ and DJIA are currently sell countdown 11 and it appears two successively new recovery higher highs, lows, and closes should identify their likely tops,” he says in an email.

“Many have asked when a reversal of trend begins and is confirmed. A confirmed downtrend requires both a 13 sell countdown, as well as the fulfillment of the upside price projection. Subsequently, once there are two consecutive closes less than the close 4 days earlier the trend should then be downside,” says DeMark.

Bitcoin
BTCUSD,
+3.54%,
he says, is approaching an important juncture. Bitcoin topped its long-term upside projection of $40,539 overnight, which is 261.8% times the Nov. 2022 low of $15,485. He does note, however, that bitcoin has never recorded a significant market top, or bottom for that matter, in weekend trading. He says bitcoin could trade as high as $42,238 — a 50% recovery of bitcoin’s entire decline from its all-time high. 

Gold
GC00,
-1.23%
is possibly a different story, he says. “Up until this weekend it appeared gold would align with stock indices DJIA and QQQ since gold was also sell countdown 11. Now with gold’s strength overnight and this morning there is a chance it could ‘recycle’ its countdown and extend its rally much higher and longer,” says DeMark. With another four to five consecutive closes above its close from four days prior, the rally can be extended for at least two more weeks if not longer, he says.

The market

Stock futures
ES00,
-0.77%

NQ00,
-1.00%
were pointing to a weaker start, after the S&P 500 closed Friday at its highest level since March 30. Bond yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
edged higher.

The buzz

Alaskan Air
ALK,
-16.59%
has agreed to buy Hawaiian Holdings
HA,
+182.72%
for $1.9 billion in cash and assumed debt, or $18 per share.

Roche
ROG,
+2.44%
agreed to buy privately held Carmot Therapeutics — a biotech focused on the hot areas of obesity and diabetes — for $2.7 billion in cash.

Spotify
SPOT,
+10.95%
said it will cut 17% of its workforce, which is the Swedish streaming company’s third round of layoffs this year.

Factory orders leads a quiet Monday on the economics calendar, in a week that features job openings and the all-important payrolls report.

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The chart

Chart of the day comes from Barclays, which argues that 2023 disinflation has been driven by the unwinding of supply shocks. However, the firm says the U.S. consumer and labor markets may not weaken enough to deliver the last mile for 2024. “With the supply shocks now behind us, domestic demand and labor market conditions will determine whether, and how fast, disinflation can continue in 2024,” said economists led by Christian Keller, head of economics research at the U.K. bank. They expect the November payrolls report to show a 225,000 rise in payrolls, a tick down in the unemployment rate to 3.8%, and a 0.3% gain in average hourly earnings.

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