BusinessWeek Writes: Hedge Fund Chart Guru Tom DeMark Sees Dark Days Ahead

“The market’s going to have one more rally, then once we get above that high, I think it’s going to be more treacherous,” DeMark says. “I think it’s all preordained right now.” He feels this is probably irrespective of how and when the crippling impasse in Washington is resolved. “If you look at the new highs and new lows on the [New York Stock Exchange],” he says, “every time we made a higher high, there were fewer stocks in the index participating in that high. It’s getting narrower.” And once that happens, you typically get a collapse. The opposite looks to be true for gold, which he expects is making its low right now and should start to move up dramatically.

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I tend to agree with Mr. DeMark to a certain extent as my own work confirms parts of his analysis. There is no doubt in my mind that we are approaching a major top here in most financial markets. Now, it is just the matter of hard work to pin point it. As I accelerate my timing work over the next few months I should have an exact answer for you by the end of the year.

With that said, there are only two possibilities here (based on my work).

1. The market has already topped. Triple tops are notoriously dangerous and tend to mark the end of a bull market. We have already set 3 tops and as I have suggested before the market finds itself in an exciting spot. We either confirm a bear market here by breaking down below recent lows over the next 4 weeks or….

2. The market will top out in March of 2014. This type of a scenario resembles Mr. DeMark’s forecast above.

Either way, we are approaching the end of a bull leg and you should begin thinking about reallocating your capital in order to avoid losses during the bear market.

Will we experience 1929 type of a decline as Tom suggest? My work doesn’t show that. It shows a slow yet volatile decline into the 8000-9000 range on the DOW over the next 2-3 years. 

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