Charles Nenner, technical analyst to the stars, says it is safe to buy the S&P 500 (SPY) this week for a trade because the big crash isn’t coming until the fall. You should use the current bout of weakness in the Australian dollar (FXA) to load the boat, probably sometime in July. Oh, and while you’re at it, short gold (GLD) as soon as it dips below $1,200.
These were just a few of the nuggets I was able to uncover in a wide ranging, extended interview with Charles on Hedge Fund Radio. Why should I give a damn what he thinks? Because he called the exact April 26 top in stocks in my interview with him on Hedge Fund Radio, all the way back on December 12 (click here for the call at http://www.themadhedgefundtrader.com/december-12-2009-charles-nenner-and-the-cycle-analysis-system ). He then repeated that prediction in my March 11 interview (click here for that call at http://www.themadhedgefundtrader.com/march-11-2010-interview-with-charles-nenner ). That’s the kind of record that keeps me thirsting for more. While Charles normally charges his top drawer clients a king’s ransom for his views, I managed to pry a few gems out of him for some bottles of the fiery Dutch liqueur, Jenever, next time I am in Amsterdam.
The bespectacled Renaissance man hails from Holland, where his firm, Charles Nenner Research, is based. He has a long career that includes stints at medical school, Merrill Lynch, Rabobank, and ten years at Goldman Sachs. He has spent three decades developing his proprietary Cycle Analysis System, which generates calls of tops and bottoms for every major market in the world.
Nenner developed a huge, global following after 2007, when he accurately nailed the top in the Dow at 14,500 and urged his clients to put on short positions when everyone else was steadfastly predicting that the market would keep grinding higher. I have been following Charles’ daily research reports myself for three years, and found them to be uncannily accurate. But you have to follow him daily, because the calls can come hot and heavy. Miss one, and you’re on the wrong side of the trade. Today, he counts major hedge funds, banks, brokerage houses, and high net worth individuals among his clients. You can find out more about Charles’ work at his website at www.charlesnenner.com.
My Bols drinking friend has recently had such a hot hand, that he would be the envy of the brow beating Texas hold-em crowd. He put out an alert to clients in mid April to simultaneously sell the (SPX) at 1187 and buy ten year Treasuries ahead of a deflation scare when they were yielding 4%. Within weeks, bonds delivered a ferocious ten point rally, chopping yields to 3%. For good measure, he also put out a short in oil (USO) at $88, almost instantly catching a plunge down to $67.
The wily Dutchman sees stocks bottoming this week above the recent 1,033 low, and then launching into a summer rally. Since Friday, he has been picking up early cycle stocks like Goldman Sachs (GS), Apple (AAPL), American Airlines (AMR), Amazon (AMZN), and Intel (INTC) to catch the move for a trade.
This is all presaging a much bigger spike down for stocks in the fall. Looking back over the past 100 years, equities reliably delivered 10% annual compound returns. Then in 1990 returns suddenly escalated, and stayed high for nearly 20 years. Now it’s our turn to revert to the mean and overshoot to the downside, bringing stock investors no end of pain. The next swoosh down will be more violent and longer than anything we have seen so far, so fasten your seatbelt. Ten year Treasuries will trade around a 3% band for the rest of the year.
Regarding currencies, Charles has a target for the euro (FXE) at $1.18. The doomed continent will have to suffer many years of deflation to get out of its current debacle. Since hedge funds will be reducing risk, they will be covering yen carry trade shorts (YCS), confining the Japanese currency within a ¥90-¥95 range, despite lousy fundamentals and a dysfunctional government. His favorite currency to own for the long term is the Australian dollar, which will continue to benefit from rising interest rates.
Charles sees emerging markets (EEM) remaining cool for the rest of the year, but still likes them for the long term. Ditto also for commodities, which aren’t going anywhere as long as a double dip recession is on the table. The recent sell off in copper is especially foreboding. Natural gas looks dire, and could hit $1.70 before it gets completely sold out.
Although there’s a trade here on the short side in gold (GLD), he is still a long term bull, and sees the barbaric relic eventually catapulting to $2,500 an ounce. Silver (SLV) should rise to $20.50 on the next bump up.
Nenner sees a major long term bull market in corn, wheat, and soybeans launching after the summer, once the perfect weather gets fully priced in. This is one of the few areas where you will be able to buy and then forget about it.
Charles passed several more pearls of wisdom on to me. To catch them all, please listen to his entire interview on Hedge Fund Radio in its entirety by clicking here at http://www.madhedgefundtrader.com/june-7-2010-charles-nenner.html .
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free.