| Trader and consultant Tom DeMark has invented | | | | indicators posted an equity sell signal. Shortly |
| dozens of proprietary technical indicators over the | | | | thereafter, he joined Paul Tudor Jones's firm for a |
| years and relies strictly on the technical principles of | | | | stint as an executive vice president and continued his |
| market timing for his research and trading. In fact at | | | | market research and systems development there. |
| one point in his career, DeMark went through the | | | | Regarding the basis of his research, DeMark said, |
| CFA program (certified financial analyst), but chose to | | | | "market timing is 100%. It's anti-trend, it's |
| never complete it. "Markets over the long term are | | | | contratrend, it's pattern recognition and price |
| controlled by fundamentals. But, my indicators | | | | exhaustion." DeMark believes his technical indicators |
| measure psychology--that's what technical analysis | | | | differ from others because "they are totally |
| does," DeMark explained. | | | | objective and mechanical and they are against the |
| DeMark's first step into the financial world came after | | | | grain of most technicians." |
| graduate school in both business and law, when he | | | | One of DeMark's well-known technical indicators, |
| joined National Investment Service, based in | | | | which he has trademarked Sequendal--"is a cyclical |
| Milwaukee, Wisconsin, as a fundamental analyst in the | | | | approach to market analysis, determinant on the |
| early 1970s. The firm managed roughly $300 million in | | | | market itself," DeMark explained. "People who work |
| pension and profit-sharing assets, investing in primarily | | | | with cycles generally take slices of time and make |
| fixed-income securities and equities. | | | | them equal. I'm saying that some trading days in the |
| National Investment Service's strength was market | | | | market are irrelevant. I try to mark comparisons with |
| timing. But DeMark said of his first job, "I was a | | | | price activity and activity of days ago," he added. |
| professional gofer .. I was low man in the company, | | | | In a year-long series in Futures magazine, beginning in |
| but I ascended quickly because I was good at | | | | August 1995, DeMark authored articles outlining many |
| market timing." | | | | of his technical indicators, which readers can refer to |
| "My goal was to be involved with a small group of | | | | for more in-depth details. DeMark also authored a |
| people who were progressive," DeMark said. The firm | | | | book entitled The New Science of Technical Analysis, |
| "avoided the stock market crash in 1973 and 1974," | | | | published by John Wiley & Sons, Inc. in 1994. |
| and assets under management grew to $6 billion. | | | | DeMark is putting the finishing touches on a book |
| "1974 was severe ... (The Dow Jones Industrial | | | | called New Market Timing Techniques: Innovative |
| Average) went from over 1000 to 570 during the | | | | Studies on Market Rhythm and Price Exhaustion, |
| political crisis with Nixon. There was a 50% decline in | | | | which he expects to be published in the spring of |
| the stock market," DeMark remembered. However, | | | | 1997 "I'll be releasing 20 new indicators. Four of them |
| the firm avoided that debacle through market timing. | | | | were some I traded while I was at Tudor-plus the |
| "They just gave me a license to do whatever I | | | | ones I created with Larry Williams," DeMark said. |
| wanted to do," he said. | | | | When asked if there are some markets DeMark |
| "I went off on my own and traded commodities. My | | | | prefers over others, DeMark responded in the |
| bosses didn't mind if I diversified for my own | | | | negative. "Everything I've done has application to all |
| account," DeMark said. In general, DeMark believes | | | | markets," he explained. |
| "the commodity side (of the business) has the more | | | | "I try to address every aspect of technical analysis |
| creative people-because the leverage involved is so | | | | and leave some of the variables open so people can |
| big." | | | | research on their own," DeMark said. Nonetheless, his |
| In 1978, DeMark set up a financial markets consulting | | | | indicators are "99% mechanical, objective and |
| division within National Investment Service. "We had a | | | | simplistic," he added. However, DeMark admits there |
| Who's Who in the industry list of clients," DeMark | | | | is more to successful trading than just good |
| noted. "I diversified, supplying stock and fixed-income | | | | indicators or system. "Money management and |
| commodity timing ... the profitability of the subsidiary | | | | discipline are more important than the system," he |
| was greater than the parent," DeMark said. | | | | said. In fact "good discipline, a knowledge of their |
| However, in 1982, DeMark broke away and continued | | | | (personal) limitations and good money management |
| his consulting. "I had $120 billion in assets collectively | | | | are more critical than the system or indicator," |
| following my bond calls," DeMark said. Just ahead of | | | | DeMark said. |
| the U.S. stock market crash in 1987, one of DeMark's | | | | |