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May 20, 2022, 7:08 a.m. EDT

The technician who called the 2020 market bottom says a ‘shocking rally’ is in store

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By Steve Goldstein

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

Walmart /zigman2/quotes/207374728/composite WMT -0.14% , Target /zigman2/quotes/207799045/composite TGT +1.67% , and Tencent /zigman2/quotes/204605823/delayed HK:700 +1.15% each reported disappointing results to add fuel to the worries about interest-rate hikes and quantitative tightening. But, Melvin Capital aside , there haven’t been signs of capitulation.

Over the last six weeks, equity redemptions have totaled $46 billion, versus $91 billion when the COVID outbreak first became apparent, according to Sean Darby, chief equity strategist at Jefferies. So you could see the argument on why markets may not have plumbed their depths.

Noted technician Tom DeMark, who called the bottom in 2020 after COVID emerged, disagrees. The founder of DeMark Analytics — known for advising hedge fund managers like Paul Tudor Jones and Steven Cohen — told Fundstrat’s head of technical strategy Mark Newton that key markets are on the verge of reversing.

DeMark’s indicators are designed for anticipating turning points, to find overextended price moves, in either direction, that reverse.

The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.99% , DeMark says, will see one more sell-off, with a close below 3,863, before a “shocking rally” lifts the index between 4,400 and 4,500. The 10-year /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.72% will make one more high before peaking, and crude oil /zigman2/quotes/211629951/delayed CL.1 +4.43% will make a top within four trading days — $117.29 per barrel, he forecasts — before turning lower.

The fundamental implications, if he’s correct, would be that the inflationary drivers of energy and commodities are peaking, which would put less pressure on inflation.

The buzz

Friday’s session features the expiration of key options contracts that could add volatility.

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

Ross Stores /zigman2/quotes/202639496/composite ROST +1.50% joined the retail Armageddon by reporting a 7% drop in same-store sales . Besides flagging sales, the retailer also pointed out the impact of higher transportation and labor costs.

Chip-equipment maker Applied Materials /zigman2/quotes/209393259/composite AMAT +3.73% reported a worse than forecast profit and gave a disappointing outlook. Cybersecurity firm Palo Alto Networks /zigman2/quotes/207599953/composite PANW +0.86% however hiked guidance for a third time .

SpaceX paid $250,000 to settle a sexual misconduct claim against its chief executive, Elon Musk, according to a report in Business Insider . Musk, also the chief executive of Tesla /zigman2/quotes/203558040/composite TSLA +2.99% and bidder for Twitter /zigman2/quotes/203180645/composite TWTR +1.09% , told the publication the story was a hit piece, and later tweeted that the accusations are untrue.

President Joe Biden started a trip to Asia with a visit to a Samsung Electronics factory in South Korea, which has machines built by Lam /zigman2/quotes/208077897/composite LRCX +4.74% and KLA /zigman2/quotes/209248041/composite KLAC +4.15% .

The markets

U.S. stock futures pointed to a strong open, with futures on the Dow Jones Industrial Average /zigman2/quotes/210407078/delayed YM00 +0.90% rising around 250 points.

The yield on the 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.72% was 2.85%.

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HK : Hong Kong
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N/A
Market Cap
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US : U.S.: Nasdaq
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96.24
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N/A
Market Cap
$720.23 billion
Rev. per Employee
$626,347
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US : U.S.: NYSE
$ 38.63
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P/E Ratio
168.67
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N/A
Market Cap
$29.20 billion
Rev. per Employee
$698,993
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/zigman2/quotes/208077897/composite
US : U.S.: Nasdaq
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1.46%
Market Cap
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$1.18M
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/zigman2/quotes/209248041/composite
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$ 305.17
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1.38%
Market Cap
$43.73 billion
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$764,943
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/zigman2/quotes/210407078/delayed
US : U.S.: CBOT
$ 31,293.00
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Volume: 45,387
July 7, 2022 8:42a
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add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
2.96
+0.02 +0.72%
Volume: 0.00
July 7, 2022 9:52a
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