Whenever I need to get back into the saddle after a prolonged absence from the markets, I call my friend, technical analyst to the stars, Charles Nenner.
Perhaps his most controversial call is that the end of QE2 will bring a substantial Treasury bond rally and a plunge in interest rates, beginning possibly as early as May. You can try and grab a handful of points to the upside. But the best way to play this is by shorting puts on Treasury bonds, which I have already done in size. This is diametrically opposed to what the overwhelming majority of the research community is calling for, which is a major crash in the bond market prompted by the end of the Federal Reserves’ massively simulative monetary program.
When I quizzed Nenner about this, his response was really quite simple. He simply reports what his proprietary cycles are telling him, and waits to learn the reasons for the moves after the fact. Figuring the reasons for major reasons in moves in global capital markets ahead of time is much harder. In any case, that is my job, not his. So true.
Charles agreed with me on the short term outlook for virtually every other market. Global stock markets are reaching the end of a global topping process. His immediate top for the S&P 500 is 1,356, with an outlier of 1,400. Then things get messy in May when a double digit, five month sell off ensues. Did I just hear “Sell and May and go away?”
Charles has been spot on with his bullish calls on oil, and says that the top is not yet in. He would keep buying serious dips with a $99 stop for West Texas intermediate.
Nenner also sees medium term topping formations in both gold and silver, and certainly would not be a buyer here. The choppiness of the market is generating a lot of noise for his system, which is making more precise, shorter term predictions difficult. The last time Charles felt like this, I managed to capture a quick $50 move on the downside with an at the money put spread. Try telling your friends at the country club that you made money shorting gold this year. You may get another chance to wear your position on your sleeve.
Copper is also in the process of rolling over. If it breaks $4.26 a pound, the top will certainly be in for the year. No doubt the cloudy Chinese inventory situation is feeding into his cycles. Right here, he has no confidence to lay on a trade in the red metal.
Foreign currencies present a mixed picture. The Euro is clearly making a run at $1.46 and may top there. The Australian dollar is in the process of topping. The Japanese yen is still trendless.
Charles hails from Holland, and 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.
Charles developed a huge 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 predicting that the market would keep grinding higher. I have been following Charles’ daily research reports myself for many years, and found them to be uncannily accurate. Last year, Charles predicted the last sell off in stocks, missing the exact April 25 top by only a single trading day.
Today, Charles Nenner 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 .