A bear market is imminent, predicts Tom DeMark, despite the recent market surge.
A Warning from Tom DeMark: U.S. Stocks Brace for a Bear Market
Here comes the buzz: Tom DeMark, a seasoned technical strategist, is sounding off alarm bells, predicting a potential plunge in U.S. stocks that could lead to a bear market in the near future.
Even with the S&P 500 (SP500) posting its longest winning streak since 2004, DeMark remains skeptical. His concern stems from various technical and emotional factors.
The Bubble Bursts: Buying Power ExhaustionDeMark's "countdown" system, a tried-and-true method developed over the years, suggests that we're nearing the end of the line for buying power. The SP500 currently hovers around 5,669, marking the point of exhaustion according to DeMark's calculations (Source: 1). This mathematical relationship in price action implies that the recent rebound (bouncing back from post-tariff losses) may not be sustainable.
Optimism is Dangerous: Market FragilityDeMark reminds us that market peaks often emerge during periods of extreme optimism. The market's nine-day surge might mask underlying instability. The technical damage from past declines remains unresolved, and shifts in global trade dynamics (like tariff risks) could cause sudden drops (Source: 1).
The Fall: A Drop Below 4,835DeMark's models project a decrease below 4,835 for the SP500. This drop would represent a more than 20% fall from the February 2025 peaks, qualifying as a bear market per definition (Source: 1). This prediction aligns with DeMark's historical accuracy in identifying past inflection points, such as the market trough in April (Source: 1).
The Missing Piece: Behavioral CatalystsDeMark's analysis assumes markets bottom out amid pessimism. The current rally lacks the usual skepticism associated with significant lows, which raises systemic risks should macroeconomic or geopolitical shocks arise (Source: 1,4). In other words, the market might not have fully priced in potential negative developments.
- The seasoned technical strategist, Tom DeMark, posits a significant drop in U.S. stocks, hinting at a potential bear market, due to his "countdown" system that predicts buying power exhaustion near the current SP500 level of 5,669.
- DeMark advises caution despite the S&P 500's long winning streak, citing market fragility as peaks often emerge during extreme optimism, concealing underlying instability.
- According to DeMark's models, the SP500 could experience a fall below 4,835, representing a more than 20% bear market drop from February 2025 peaks.
- However, DeMark's analysis suggests that the market might not be fully prepared for potential negative developments if current market behavior lacks the usual skepticism associated with significant lows.
