Tom Demark’s analysis for 2014: A crash in the making for stocks and rebound for gold?
Tom Demark is a well-known technical analyst with a remarkable track record. Tom appeared on CNBC on December 16th, and discussed how the Fed has clearly prevented sell-offs in the US stock market time and time again for the last year and a half according to his technical studies. Tom fears the stock market could experience a 1929-type of decline soon, after possibly peaking in January, 2014. Given Tom’s experience I wouldn’t discount so easily his warning. Nonetheless, it is good to bear in mind that horrible bear markets such as those of 1929, 1987 and 2008 have been always avoided by those investors following the Dow Theory. If you want to see in closer detail how the Dow Theory managed to dodge the 1987 crash, please read my post “Revisiting the 1987 crash”
Tom also discussed how his work projects one more decline in gold (2013 year end tax loss selling) to $1155-$1180, but then he expects a huge move up by gold in 2014. What’s my take on such a forecast? Well, here you have it:
1) Since I focus on the primary trend and long term moves (let’s say 1-2 years), it is close to impossible to discern what will be doing gold in the next few days before 2013 draws to an end.
2) However, given that the primary trend of gold is bearish (as has been repeated ad nauseam on this Dow Theory blog), the odds favor the downside rather than the upside. Nonetheless, I insist, the Dow Theory is not the proper tool to make short term forecasts.
The Industrials, Transports and SPY closed up; all of them bettered the last recorded closing highs, which means that the primary bull market remains in good health.
The primary trend was reconfirmed as bullish on October 17th and November 13th, for the reasons given here and here.
Volume contracted today and was much lower than Friday’s, which is bearish as higher prices were not joined by expanding volume. Given the bullish volume pivot we saw two days ago (more about it here) and recent volume readings, I label volume as bullish.
Gold and Silver
SLV and GLD closed up. In spite of today’s up close, GLD remains below the primary bear market lows of June 27th. However, SLV remains above such lows, and thus, for the time being, the primary bear market has not been re-confirmed once again yet. For the reasons I explained here, and more recently here, I feel the primary trend remains bearish. Here I analyzed the primary bear market signal given on December 20, 2012. The primary trend was reconfirmed bearish, as explained here. The secondary trend is bullish (secondary reaction against the primary bearish trend), as explained here.
As to the gold and silver miners ETFs, SIL, and GDX closed down. The primary trend is bearish, as was profusely explained here and here. Likewise, the secondary trend is bearish.
Here you have the figures for the SPY which represents the only market with a suggested open long position:
|Data for December 23, 2013|
|DOW THEORY PRIMARY TREND MONITOR SPY|
|Bull market started||06/24/2013||157.06|
|Bull market signaled||07/18/2013||168.87|
|Current stop level: Secondary reaction low||165.48|
|Unrlzd gain %||Tot advance since start bull mkt||Max Pot Loss %|
The Dow Theorist