Takeaways from Wed. DeMark webinar --> S&P 500 4,400-ish possible near-term. Energy '13' bottom. Bitcoin likely bottomed. VIX going to 13
I am sending along my takeaways from our Wednesday webinar with Tom DeMark, the founder of DeMark analytics. Tom DeMark is a widely market systemic timer and is considered one of the pioneers of technical analysis. There is no replay, at the request of DeMark. So our summary below is the only way to get the abstracts.
Here is our list of takeaways:
1. A possible ’13’ top formed in equity markets in early April, but the 3 major indices fell out of ‘alignment’ so that bearish view is negated
2. S&P 500 is in an ‘uptrend’ and possible target of 4,400 near-term. Nasdaq has upside but less so.
3. VIX is heading to 13-ish
4. Market breadth, measured as % stocks above 50D, set to surge = broader participation, not mega-cap led
5. Energy looks like it has bottomed = upside to Energy stocks (sweet!!!)
6. WTI should be expected to exceed its prior high, or $76.90 from October 5, 2018
7. XLE and OIH should trade to levels on October 5, 2018, which is $78.36/ $526.51, respectively, or +56% and +178% upside.
8. Bitcoin sold off at a ’13’ but found support at an anticipated key level of $47,000-ish = new uptrend likely underway
BOTTOM LINE: To me, the biggest takeaway, is the move in WTI to $76.90 and the associated ballistic rise in Energy stocks. If oil does rise to $76.90, which is consistent with Goldman Sachs’ $80 projection by Summer, and Energy equities rally to 2018 levels, we expect institutional investors to massively Overweight Energy stocks before year-end. This would be a formula for a melt-up.
…S&P 500 sold off to key level 4,137-ish and upside now 4,350-4,400
DeMark cited a trifecta of factors that pointed to a pullback to 4,137 in S&P 500 in April. As these charts show, that is where the S&P 500 retraced and now the upside in play is 4,350-4,400 and a possible upside to 4,600
– a few weeks ago, there was a ’13’ spotted on equities, but this was negated
– the alignment was not seen in Dow, Nasdaq and S&P 500
– now they are ‘aligned’ to the upside
Hence, stocks are still in an uptrend
This is consistent with our view that we will see S&P 500 4,400 before mid-year, maybe in the next month or so
…VIX still heading lower towards 13.48 or lower
He also pointed out the VIX downside target is 13.48.
– the VIX could breakdown further below that level
– but 13.48 is the key level to watch
– VIX is 17.6 now
…Market breadth should rise = small-caps > mega-caps
DeMark also sees the % stocks >50D surging. This is a breadth indicator.
– if # stocks >50D goes up = small-caps
Our takeaway: Megacaps likely underperform (FANG/Growth) and Small-caps likely resume leadership
…Energy (XLE) likely bottomed vs broader market
DeMark also noted that Energy (vs S&P 500) seems to track DeMark signals closely, as both the combo and sequential counts work at the tops and bottoms.
– XLE/SPX posted a ’13’ bottom and is now in an uptrend
– this means Energy stocks should outperform S&P 500
…Crude oil expected to surpass 2018 highs of $76.90, implying +56% upside for XLE and +178% upside for OIH
Tom DeMark also noted that he expected Crude, when looking at the weekly chart, that it would be typical for crude to exceed the prior highs at the next ’13’ — in this case, the 2018 highs of WTI of $76.90. See below.
– if WTI exceeds its October 5, 2018 highs, XLE and OIH should at least “re-attain” its October 5, 2018 levels
– XLE was $78.36 on October 5, 2018 vs $50.11 today, or +56% upside
– OIH was $526.51 on October 5, 2018 vs $189.04 today, or +178% upside
Takeaway: The confirms our view that Energy stocks are due to a huge catch-up to oil. The upside in XLE and OIH is way higher than many appreciate, if correct, with >100% upside for OIH and >50% for XLE. So we think Energy remains very attractive, even as we realize this group feels “leaning against the wind”
…Bitcoin saw a textbook 20% selloff after a ’13’ but now found support at ~$47,000
Bitcoin saw a textbook sell-off of >20% after a ’13’ qualified combo count.
– downside target was $47,000 on two different models –> TDST shown below
– if this holds, and is likely, given this was a level prior to the last ‘sell countdown’ (green 1), Bitcoin going to rally
Takeaway: Not crystal clear what to expect here… Key level is $62,000 and $47,000. The daily DeMark count shows an uptrend, so that is what should be watched and a move above $62,000 affirms selloff over
