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Hedge Fund Telemetry Demark Indicator Primer

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Here’s the DeMarkIndicator Primer from Hedge Fund Telemetry

•At Hedge Fund Telemetry, we have used DeMarkIndicators for nearly 20 years in our analysis and live trading of the markets. 

•Tom DeMarkstarted developing his indicators in late 70’s astonishingly by hand on large sheets of paper well before computer technology. Today, Tom DeMark’sindicators are used by many of the greatest traders and money managers around the world and with the advancements in technology today, the indicators are moving into A.I. and machine learning. 

The DeMarkIndicators are designed to assist the user with buying into weakness and selling into strength to anticipate trend exhaustion. Selling into a rally and buying into a decline often afford the opportunity to exit a trade without too serious a loss if wrong. This is the overall psychology of DeMarkIndicators. 

This guide is filled with just the basics. Further study is recommended by purchasing one of Tom DeMark’sbooks or Jason Perl’s excellent book on DeMarkIndicators. On the Hedge Fund Telemetry Daily Note each day you can follow along as the indicators develop trends and exhaustion signals. After a while, it sinks in with the many instructional tips on how to interpret and trade various situations. 

We use the most widely known indicators (Setup, Countdown Sequential, Combo) as we have always wanted to keep these complex indicators as simple as possible especially with those that do not have the experience using the indicators. Many times we will just isolate the “Green 9’s, Red 13’s, and Pink 13’s” so there is little distraction from the key signals. 


This is a chart of UPS as there were recent upside and downside exhaustive moves. 

Countdowns:

Everything starts with the TD Setup (green 1-9). When it’s moving up it’s referred to as a “Sell Setup” and when it’s moving down it’s a “Buy Setup”.The red TD Sequential Countdowns only can start after a completed Setup (the rules are to the right) and when moving up it’s a “Sell Countdown” and down it’s a “Buy Countdown.” 

There are a few basic rules: 

First the Setup has to have 9 consecutive closes higher/lower than 4 previous closes. If that exact count is interrupted the Setup count is cancelled and disappears. With the Countdown, it doesn’t have to work in perfect sequence but gets a new number if the close is less/greater than, or equal to, the low/high of 2 earlier bars. 

The rule of thumb with a completed TD Countdown 13 is to expect a trend direction change within 10-15 bars. If that does not occur, the likelihood of a continuation of a very strong trend increases. 


TD Combo Countdown (pink) is similar to the TD Sequential Countdown as it works well spotting exhaustion points at the end of a trend.

The main difference between TD Combo and TD Sequential is that Combo can start when the Setup starts whereas the Sequential has to wait for a completed Setup 9. 

The Combo, like the Sequential, also doesn’t have to occur in an uninterrupted sequence. 

The Combo for many people is the preferred indicator for intraday trading yet it’s really a personal choice

We often use both the Sequential and Combo in sync with each other as the Combo can trigger 


This is a chart of Bitcoin (a short Idea from mid December on Hedge Fund Telemetry’s Daily Note)

When trading using DeMarkindicators, my process is to if long sell the full position with an upside “Sell Countdown” 13. If establishing a new long or short position with either a downside “Buy Countdown” or upside “Sell Countdown” I will start with a 2.5% size position and add with the price closing higher/lower than four previous bars. 

I monitor the pink dotted line “Risk Level” and will set a stop a few percentages above or below the Risk Level. 

TD D-Wave is a mechanical version of Elliott Wave analysis. I have found it exceptionally helpful when combined with trend exhaustion indicators. There’s a lot to how these work yet quite simple. I hope to have a specific webinar with the TD D-Wave indicator soon. 


This is also the daily chart of Bitcoin on a different format that highlights the TDST green/red dotted lines that act as good support and resistance levels to watch. 

TDST TD Trend Setup starts as a true high/low point at the start of the Setup (the price flip first green 1) 

The lower indicators are not DeMarkIndicators but a couple I developed. The upper one is a measure above/below the 50 day moving average. The lower is the 20 day. This works well spotting overbought and oversold conditions and using a moving average on the indicator has helped improve timing and keeps one in the trade longer when it’s working. 


The Sequential Countdown as mentioned earlier does not have to occur exactly in sequence like the Setup. 

One of the rules is that the 13thbar can only trigger under/over the 8thred bar if the other perimeters are met. If the perimeters are met but it’s not under (in this case) the 8thbar a small red + will show up. It can go for a while without triggering. 

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On the Hedge Fund Telemetry Daily Note we screen for Sequential Countdown Sell/Buy 13’s and “Price Flips” which are the start of potential reversals (Start of new Setup Green 1 –due to trading above/below 4 previous closes)

This chart lists tickers on our radar having hit a Sequential Countdown 13’s on daily, weekly, and monthly time frames. 

Those with daily upside 13 (Sell Countdown) are names we would further analyze for selling opportunities.

Those with daily downside 13 (Buy Countdown) are names we would further analyze for buying opportunities.

The arrows point to the highest probability tickers. Those with price flips. 

The best way to use the overall screen is to help draw attention to names that are likely at inflection points. Alternatively, when you spot a number of stocks (overall or within a sector) with upside/downside signals outweighing the other side, it is typically an indication of risk/opportunity.

 

Hedge Fund Telemetry LLC. cannot guarantee the confidentiality of the material transmitted; therefore, information of a sensitive or confidential nature should not be transmitted. There is risk in trading markets.Hedge Fund Telemetry LLC reports are based on information gathered from various sources and believed to be reliable, but are not guaranteed as to accuracy and completeness.The information is subject to change without notice and Hedge Fund Telemetry LLC has no obligation to provide any updates or changes. Hedge Fund Telemetry LLC is providing this data for informational and educational purposes and does not believe that it is sufficient to base an investment decision on. This information should not be regarded as a solicitation or recommendation of any particular security or to engage in any trading strategy. One should always check with your licensed financial advisor to determine suitability of any investments.