DeMark & Gann Analysis – Attempting To Pick The Date Of The Next Market Top

By Christopher Diodato –

Feeling slightly irrational right now, let’s analyze the market using some of the most ambiguous, but still effective methods.  It’s common knowledge now that I believe that the S & P will hit the 1566 level before reversing, but when?  We can place a market top around October 22-26 using both Gann and Demark analysis.  Unfortunately, we don’t know whether that will be the final top, or the second to final top (my current analysis says we get one more chance to buy the dip).  It is all dependent on the speed of the next advance.  The market will give us those answers as the date draws nearer.

Here’s the chart of the Demark Sequential, which is a completely objective alternative to Elliott Wave analysis.  The logic is that after nine consecutive closes higher (with some qualifiers), the market will be vulnerable to an exhaustion sell-off.  This method was exhaustively tested by Tom Demark and it works in all time frames.  Here are the weekly and monthly charts of the Sequential on the S & P 500 ETF, SPY.


And on a monthly basis

Both charts present an “if/then” scenario.  The scenario that I see presents a possible market top in October, and specifically around October 22-26.  All we need is a continued up trend, which after the Bernanke put was activated, seems imminent.  Even a slowly uptrending market will give a complete setup.

So there is a look from the Demark point of view.  Stay tuned for tomorrow’s post on the Gann analysis.  It comes to a similar conclusion.

Happy trading!

~Chris Diodato

Christopher Diodato

About Christopher Diodato

I have been trading since my eighteenth birthday to pay for my college tuition. It was at first rocky, but now trading is my love, my work, and my passion. In addition to my experience in markets, I have passed all three exams to obtain the Chartered Market Technician (CMT) credential. I believe that I am the youngest to ever do so! I want to help out small investors to make some money on the side. There's a common notion out there that "big money" rules all. I disagree. With enough hard work and discipline, anyone can become the next Paul Tudor Jones!