Technician who rated 2020 market bottom says ‘shocking rally’ ahead

It’s been a terrible week in a horrible year for the stock market.

WalmartWMT,
+0.11%,
target TGT,
+1.26%,
and Tencent 700,
+3.53%
each reported disappointing results to add fuel to concerns about interest rate hikes and quantitative tightening. But apart from Melvin Capital, there have been no signs of capitulation.

In the past six weeks, stock bailouts have totaled $46 billion, compared with $91 billion when the COVID outbreak first became apparent, according to Sean Darby, chief equity strategist at Jefferies. So he could see the argument as to why the markets may not have plumbed its depths.

Standout manager Tom DeMark, who hit rock bottom in 2020 after COVID emerged, disagrees. The founder of DeMark Analytics, known for advising hedge fund managers such as Paul Tudor Jones and Steven Cohen, told Fundstrat’s chief technical strategist Mark Newton that key markets are about to reverse.

DeMark indicators are designed to anticipate turning points, to find overextended price moves, in either direction, that are reversed.

The S&P 500SPX,
+0.01%,
DeMark will see one more sell-off, closing below 3,863, before a “shocking rally” lifts the index between 4,400 and 4,500. The 10-year TMUBMUSD10Y,
2,791%
will make one higher before peaking, and CL.1 crude oil,
-0.47%
it will top out within four trading days ($117.29 a barrel, he forecasts) before turning lower.

The fundamental implications, if he is right, would be that energy and commodity inflation factors are peaking, putting less pressure on inflation.

The buzz

Friday’s session features the expiry of key option contracts that could add volatility.

The People’s Bank of China lowered the rate used for home mortgages in the country from 4.6% to 4.45%.

Ross ROST Stores,
-22.47%
joined retail Armageddon in reporting a 7% drop in same-store sales. In addition to falling sales, the retailer also pointed to the impact of higher transportation and labor costs.

chip equipment manufacturer Applied Materials AMAT,
-3.86%
reported a worse than forecast profit and gave a disappointing outlook. Cybersecurity firm Palo Alto Networks PANW,
+9.70%
However, he uploaded the guide for the third time.

SpaceX paid $250,000 to settle a sexual misconduct claim against its CEO, Elon Musk, according to a report in Business Insider. Musk, also CEO of Tesla TSLA,
-6.42%
and Twitter bidder TWTR,
+2.68%,
told the publication that the story was a hit and later tweeted that the allegations are not true.

President Joe Biden kicked off a trip to Asia with a visit to a Samsung Electronics factory in South Korea, which features machines built by Lam LRCX,
+0.42%
and KLA KLAC,
-0.90%.

The markets

US stock futures pointed to a strong open, with futures on the Dow Jones Industrial Average YM00,
+0.12%
going up about 250 points.

The 10-year Treasury yield TMUBMUSD10Y,
2,791%
it was 2.85%.

The best tickers

Here were the most active stock market tickers at 6 am ET.

Heart

security name

TSLA,
-6.42%

Tesla

gme,
-3.56%

gamestop

AMC,
-8.03%

AMC Entertainment

LITTLE BOY,
-1.32%

child

AAPL,
+0.17%

Apple

TWTR,
+2.68%

Twitter

AMZN,
+0.25%

amazon.com

NVDA,
-2.51%

nvidia

BIG,
+3.96%

vinco companies

amd,
-3.28%

advanced micro devices

The video

It’s hard to find a better video than a programmer teaching his goldfish how to pick stocks and then comparing the results to the picks on Reddit Wall Street Bets. (Contains some swear words).

random reads

Finland’s NATO application is still pending, but NATO beer has already hit the shelves.

Bob Cousy, the now 93-year-old basketball legend, responded to ESPN’s JJ Redick’s comment about “plumbers and firefighters.”

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