Bear Market Looms as S&P 500 Rally Hits Technical Wall: DeMark Warns of Impending Decline

Veteran technical strategist Tom DeMark has issued a stark warning: the S&P 500’s current rally is nearing exhaustion, with a potential bear market just months away. His analysis, rooted in decades of market cycle research, points to critical technical thresholds and sentiment shifts that could trigger a steep decline. Here’s why investors should take note—and what the data reveals.

The Technical Case for a Bear Market

DeMark’s prediction hinges on his proprietary “countdown” methodology, which identifies market exhaustion through closing price patterns relative to four-day prior highs or lows. When this sequence repeats nine times, it signals a sell-off. As of recent analysis, the S&P 500 has already completed seven of these cycles, needing just two more consecutive closing highs to trigger a definitive downturn.

At its current level near 5,669, the S&P 500 faces a critical resistance point where buying power is expected to falter. A breach below 4,835—a level last seen in April—would confirm a bear market, marking a 20% decline from its February peak. This drop would meet the traditional definition of a bear market, signaling a prolonged downturn.

Why the Rally Is Unsustainable

DeMark emphasizes that markets typically peak during periods of optimism (e.g., trade negotiations) and bottom when sentiment is universally bleak—a pattern he argues is now unfolding. The S&P 500’s recent nine-day winning streak, its longest since 2004, is seen as a final “exhaustion rally” rather than a sustainable trend.

“Markets don’t bottom on good news,” DeMark notes. “They bottom when everything is terrible.” Current conditions, while buoyed by short-term optimism, lack the extreme pessimism required to signal a true bottom. The rebound from recent tariff-driven losses has been technically weak, with momentum indicators failing to confirm the gains.

Global Trade and Sentiment Risks

External risks, particularly global trade uncertainties, could accelerate the decline. DeMark highlights that abrupt shifts in U.S.-China trade policies—such as tariff announcements—have historically amplified market volatility. With the S&P 500’s technicals already damaged, any escalation in trade tensions could push the index toward its 4,835 support level.

Historical Accuracy and Implications

DeMark’s track record adds credibility: his models correctly predicted the February 2025 peak and the subsequent April low. His cyclical timing framework has historically aligned with major market turns, making this warning particularly compelling.

If his analysis holds, investors could face a sharp correction. A drop to 4,835 would erase nearly $12 trillion in equity value from the S&P 500’s peak. The sell signal’s activation—dependent on two more closing highs above 5,669—is a near-term risk, with the countdown mechanism suggesting a window of days, not months, before the decline begins.

Conclusion: Prepare for a Market Reversal

The evidence is clear: the S&P 500’s rally is on a technical knife’s edge. With two countdown cycles remaining to trigger a sell-off, and resistance at 5,669 weakening, the setup for a bear market is in place. Key data points—historical bear market thresholds, sentiment cycles, and DeMark’s proven methodology—all point to a sustained decline.

Investors should prioritize risk management: consider reducing equity exposure, hedging with inverse ETFs, or shifting toward defensive sectors. The S&P 500’s journey to 4,835 is not a matter of “if,” but of “when,” with the countdown already in its final stages.

As DeMark reminds us: markets peak in optimism, bottom in despair. The current rebound may delay the inevitable, but the technical and cyclical forces at play suggest the bear’s claws are poised to strike by late 2025.