Jeff Macke interviewed Charles Nenner, head of the Charles Nenner Research Center, on Yahoo’s Breakout to get his views on the major markets. Nenner said he expects the S&P 500 to hit a cycle low next week, after which we could see a bounce again.
Nenner wanted to explain two things: his system shows S&P 500 profits are going to go up six percent and there is a linear relationship between profits and stock prices; also there is an exponential relationship between stocks and bonds. If bonds go down, stocks go up exponentially Nenner explained.
Since rates will not be going lower, it is Nenner’s opinion we should only focus on the linear relationship. Stocks are in a 5% trading band so investors looking for major moves are going to be disappointed, Nenner added. If the S&P 500 breaks 1280 it could go as low as 1235 according to Nenner. He said they don’t own any stocks because they are too dangerous.
To play the weakness in bonds, Nenner said they have a long term position in ProShares UltraShort 20+ Year Treasury (TBT).
Nenner sees gold continuing in a down cycle until August-September. His projected downside target for gold is $1,375/oz. However, gold will go much higher later in the year, he said, with an upside target of $2,500/oz.