Welcome, greetings and bienvenue to all you well-muscled, sporty types who love a good, old-fashioned punch-up competition.
Today, we’re announcing our annual, winner-take-all, anti-ISIS stock market predictorama, whereby you offer your best take on the December 31st outcome of all your favorite securities and asset classes, and we, too, take a kick at the can.
Prizes! Winnings! Heavenly Delights!
And in keeping with the theme and spirit of the times, the winner of this year’s event will be offered no less than a comely seventy-year-old virgin – and you needn’t blow yourself up to claim her, either!
Just come closer in the final tally than any of your peers, and you travel first class, round trip via Malaysia Airlines to – MOSUL, IRAQ! investment paradise – where you’ll stay at what’s left of the Holiday Inn along with your droopy-skinned honey for a week of artillerous bliss and lead-dodging hijinx, all courtesy of your dearly beloved Baltimorean publishers.
Let’s kick it off with our own humble predictions and then move on to a trade.
On the Last Day of 2016…
You can expect to see the Dow Jones Industrial Average to be cruising in the vicinity of 20,000, though we’re still not certain if that’ll be on its way up or down. From today’s levels that’s a gain of some nine percent.
As for the NASDAQ Composite, we’re expecting a slightly larger rise, something in the order of twelve to fifteen percent since she’s been encountering significant resistance at her old dot.com highs in the 5000 vicinity. Once she punches above those levels, there’s little reason to expect investor restraint.
NASDAQ Composite 5650.
Here’s the ‘DAQ –
Gold and Oil
While we await the NASDAQ breakout, consider a few commodities: gold, silver and oil.
Gold will be up and down and widely discussed for the next six months, but when all is said and done, we figure she won’t tally such a great gain – something in the order of a percent or two… maybe.
In the great sprint of assets toward the bull market finish line, gold and silver won’t likely hold their own against a surging equity market. Equities have always been sexier, and that should limit the gains in the precious metals decisively.
Here’s a chart of gold –
The only key takeaway from the long term chart is the falling wedge formation (in red), a pattern that’s always bullish once it’s broken to the upside.
We would emphasize that last point. Gold, as represented above by the SPDR Gold Trust (NYSE:GLD), could still fall significantly and remain within the parameters of the falling wedge. That is to say, yes, the pattern is bullish. But not yet tradeable.
We call for GLD to close 2016 in the middle of the wedge. Call it $110.
As for silver, look for a sideways slide here, as well. We see a range of anywhere from $17 to $21.
Split the difference and call it $19 by New Year’s.
Crude Oil, Slippery Character
As for oil, it’s more difficult. A rising stock market should be accompanied by a strong price for crude – at least that’s the way it works most of the time.
But we’re living in less than normal times, friends, so don’t count on it. The best we could assume is a retracement rally that runs out of steam in the $60 area before year’s end.
Throw the knife and call it $55.
Long Bond and the Dollar
Two more predictions before we wrap it up – the long bond and the dollar. But for your part, feel free to write us with your best estimates on all the foregoing and anything else that strikes your fancy, including individual stocks, the World Series winner, college football’s number one, what have you.
We look forward to hearing from you (and we’ll ask that the lads upstairs send you something worthwhile should you take the roses).
We pair the long bond and dollar because they more or less track one another over the long haul. It’s not a perfect 1:1, but close enough.
Have a look at a few years of the two charted together –
This is the U.S. Dollar Index (DXY) and the iShares 20+ Year Treasury Bond ETF (NYSE:TLT), and as you can see, they generally trend together. Going forward, we expect more of the same.
As the U.S. market gains speed and the Dollar rides that wave, look for the long bond, too, to appreciate.
DXY will return to 100.
TLT will close at 142.
2016 Presidential Race
As for the election, we can’t resist. We’re going to offer our thoughts, though we warn that they’re not in the least orthodox.
We’ll start by saying that this will be the most interesting presidential runoff in your lifetime, and maybe ever. The battle will be as pugilistic an affair as prime time allows, and outside an open microphone swearing bout (for which both Trump and Hillary are aptitudinally capable), you’re gonna see it all.
More importantly, there may be more at stake for the country here, and, indeed, the whole world, from the results that emerge in November.
The candidates represent as divergent a worldview and approach to governing as we’ve ever seen from the mainline political parties. This is not a simple matter of differing policies. This election pits two completely different visions for what America ought to be.
Yet our understanding of the matter transcends even that.
We See the Future
We don’t want to get into essential differences between the candidates or argue morality here. Rather, we can already see the potential legacy of both individuals. And taken together with the temperament of the electorate as it’s currently constituted, our prediction is as follows.
The country will elect the candidate and party that will inflict the greatest damage to the American polity as possible.
Not because it wants to, and not because those who cast their ballots believe their candidate is evil or intends to do evil. Indeed, everyone’s hoping for the best.
But the results will be otherwise.
Because the path that we’ve travelled collectively as a nation and the momentum that obtains today are sending us headlong down a path whose trajectory and ultimate end are irrevocable.
It’s our Jungean belief that President Clinton will speed us down that destructive path at a faster rate than President Trump, and therefore deem it foregone that a bet on the Democrats is a winner.
Not because we want it. And not because it’s desirable. As a strictly money-making proposition, a dollar bet on Hillary today is a superior wager.
This week’s trade offers a deliberate take on our end-of-year predictions for NASDAQ and the precious metals.
As stocks climb over the next six months, look for the PMs to lose their appeal.
We’ll use the wildly overbought VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ) and PowerShares QQQ Trust (NASDAQ:QQQ) to pull it off.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
With kind regards,
Hugh L. O’Haynew