After the best first quarter since 1998, Charles Nenner, founder of Charles Nenner Research thinks the rally is coming to an end. With a price target of 1,449 on the S&P500, a mere 2% higher than the opening levels of Tuesday, "it's a little late to buy this thing," he says.
The forecaster uses cycles of time and price to set his sell levels. "The first stop is 1,449," he says, adding that the level "could be a very important high."
For those at home the challenge is trying to resist the Siren Song between here and those levels. "Individual investors, they're more upset if they miss another 3% on the upside than 10% or 15% on the downside," Nenner says..
It's counter-intuitive and contrary to studies on loss aversion, but of such short-term thinking are market tops formed. It's called capitulation, a blow-off top, or any of dozens other labels. But the point is the same: Eventually jealousy, greed or even cynicism lures the last of those on the sidelines into stocks. It's a Wall Street rule of thumb that those moments mark the top.
The problem for those not buying is the desire to short an up tape. Nenner makes it clear that the S&P reaching 1,449 isn't a cue to short, just a time to sell. Despite everything you may hear to the contrary, as far as he's concerned "there's nothing wrong with cash."
For those who don't sell the top, or should that top never come, Nenner has a stop in at 1,375. It's a familiar theme on Breakout: if you control your risk you can try most anything you want. Barring a drop of over 3% from today and having the discipline to sell at the level from which we broke higher in early March, will keep you from getting destroyed.
As for the arguments against the global money printing ending in disaster, Nenner doesn't particularly disagree.
"It's not going to end well," he says. "But for the moment we're still ok."
His view is a variant on "hold your nose and buy it." It's the only stance that's been a moneymaker so far this year.