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How About Tom DeMark?

| | Posted in: Individual Gurus

A reader asked: “Have you examined Tom DeMark?”

Tom DeMark’s Market Studies web site states:

Tom DeMark is founder and CEO of Market Studies, LLC, and creator of the DeMark Indicators. Mr. DeMark currently serves as special advisor to Steven A. Cohen of SAC Capital Advisors, a role he has held for the past 14 years. Mr. DeMark has authored three successful books relating to the DeMark Indicators and market timing.”

“The DeMark Indicators are a suite of sophisticated market timing models designed to identify likely trend exhaustion opportunities prior to their occurrence. Created by Tom DeMark over the course of nearly 40 years in the investment industry, these proprietary timing tools provide an objective method of analyzing markets, producing effective results regardless of region, asset, price, period, and history.” There are 71 of these indicators.

The indicators “do not require traders or investors to abandon their existing approaches. Rather, the Indicators serve to enhance that analysis and, ideally, their performance results… the market timing capabilities of the DeMark Indicators, coupled with sound money management and trading discipline, will enable one to increase his prospect of trading success.” [Underlining added.]

There are apparently no quantitative studies of the statistical or economic significance of the indicators on this site. The weak performance claims in the third item above would be very difficult to prove or disprove. A prospective buyer might wonder:

  • Why, if the indicators have great economic value, their creator would sell them rather than just use them privately.
  • Whether the indicators carry material data snooping bias.
  • Whether their broad dissemination would extinguish any past efficacy.

The archives of MarketWatch.com do not cite Tom DeMark. There are a few citations at TheStreet.com. There are a few articles by and about Tom DeMark at TradingMarkets.com.

There may be more specific information about the indicators scattered across the web.

In summary, the burden of assessing the value of Tom DeMark’s indicators and associated services is heavily on the side of the prospective buyer.

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