TOM DEMARK: The Next Two To Three Days Are 'Extremely Critical' For The Stock Market - It May Crash 40%

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Tom DeMark

Bloomberg TV

Tom Demark

Noted market-timer Tom DeMark did not sound optimistic about the prospects for stocks in an interview with CNBC this morning.

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DeMark compared today's market to that preceding the Black Friday crash in 1929.

"When the market made its high on September 3, [1929], there were 23 subsequent trading days where the Dow Jones Industrial Average had a short-term bottom," he said.

"23 days aligns with the low end on Monday. And subsequent to that, we had a four-day rally, and then the market unraveled - went down 48%. We are currently at that inflection point. Like I said, so far, everything is aligned. We think the next two to three days are extremely critical."

DeMark explained why:

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We get into the minutia as well as the long-term, and what it looks like to us - if we were to, yeah, just for as an example - if today were to be an up close, versus the prior day's close, and then tomorrow, we close down, and we follow with a lower opening the next day, and trade a little weaker, we're probably going to unravel quickly.

Now, yesterday, we did have an up close on most of the major U.S. indices. So, if we get a down close today, and tomorrow we open lower and trade lower, we're probably going to unravel, and the news, regardless of what it is on Friday, will be negative - perceived negative.

What we're seeing right now, if the market does unravel, I think we'll have a correction of 40% off the high, which would put us at about 1100 [on the S&P 500 index].

We should note that DeMark has been looking for a top in the stock market for a while.