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The Nasdaq is on the verge of exhaustion, says famed technical strategist Tom DeMark


Stocks have climbed a mountain of worries this year, ranging from lingering inflation to bank collapses to the possibility that the U.S. Congress might just decide not to pay its bills. But has the run, also fueled by excitement over artificial intelligence, gone too far?

That’s the suggestion of Tom DeMark, who was recently celebrated by the technical analysis CMT Association and is the founder and CEO of DeMark Analytics. He focuses on the number of days — which don’t have to be consecutive — that there was a close lower than the low of two days ago. Subject to various conditions, when the countdown reaches 13, a buy signal is triggered. (The opposite is the case on the way up.)

In an email to MarketWatch, DeMark, who has advised investing legends including Paul Tudor Jones, Leon Cooperman and Steven A. Cohen, says the Nasdaq 100
QQQ,
+0.11%

has been in an extended uptrend, but now it’s likely approaching exhaustion. See DeMark’s analysis on his website Symbolik.


DeMARK Analytics

He says a Nasdaq 100 ’13’ top will need both a higher high, as well as a higher close, than Tuesday’s levels.

“This will be the first time this year Nasdaq 100 time and price trend exhaustion components should be in sync with one another. Once they align, a subsequent close less than both the closes 4 and 5 days prior should confirm the nascent downtrend,” says DeMark.

He also identifies another change. He says the five-plus months of Nasdaq 100 outperformance over the S&P 500 is about to reverse. “Once two additional higher closes are recorded, sell countdown 13 will be recorded,” DeMark says.

Not that it’s necessarily good news for the S&P 500
SPX,
-0.64%

or the SPY exchange-traded fund
SPY,
-0.67%

tracking it. “Currently, SPY is sell countdown 11 and requires two successively higher highs and closes greater than the February 2 high to record a ‘possible’ market top which must then be confirmed” by related markets.


DeMARK Analytics

The VIX
VIX,
-2.06%

volatility index, he says, may be able to move higher. “VIX is both sequential and combo buy countdown 12 and with an upcoming new low close should record buy countdown 13. Typically, markets respond to VIX 13’s within 1-3 trading days after 13 is recorded,” he says.


DeMARK Analytics

The markets

U.S. stock futures
ES00,
+0.35%

NQ00,
+0.21%

were pointing higher after Tuesday’s weaker finish. Gold futures
GC00,
-0.09%

were below $2,000 an ounce. The yield on the 10-year Treasury
TMUBMUSD10Y,
3.518%

was 3.52%.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

House Speaker Kevin McCarthy said a debt-ceiling deal could be reached as early as this week as President Joe Biden cut short an upcoming foreign trip. “[Tuesday’s] meeting between President Biden and House Speaker McCarthy went as well as could have reasonably been hoped for,” said economists at Citigroup.

Target
TGT,
-1.62%

and after the close Cisco Systems
CSCO,
-0.38%

highlight the day’s earnings releases. Target issued a warning about theft and organized crime denting results.

Western Alliance Bancorp
WAL,
+2.70%

said its deposits rose by $2 billion during the second quarter, news that lifted its shares as well as other regional lenders including PacWest
PACW,
-14.58%
.

UBS
UBS,
-1.44%

estimates it will book a $35 billion gain from buying its fallen rival Credit Suisse.

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Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

Ticker

Security name

TSLA,
+0.10%
Tesla

GME,
+1.71%
GameStop

AMC,
-3.50%
AMC Entertainment

XELA,
+103.90%
Exela Technologies

MULN,
-2.40%
Mullen Automotive

AAPL,
Apple

BUD,
-2.24%
Anheuser-Busch InBev

AMZN,
+1.98%
Amazon.com

NVDA,
+0.90%
Nvidia

NIO,
-4.12%
Nio

The chart

There are a variety of indicators forecasting the U.S. to enter a recession — but this market implied gauge has reached 99%. The model uses the difference between the 3-month forward Treasury rate beginning 18-months ahead and the 3-month Treasury bill to estimate the probability of a recession in the United States 12 months ahead.

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Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.



This story originally appeared on Marketwatch

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