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