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2 Years After the Bottom, the ‘Smart Money’ Is Selling: “It’s a Bit Late to Go Long,” Nenner Says

Aaron Task
Editor in Chief
Fin - Daily Ticker - US

Wednesday's two-year anniversary of the start of the bull market proved anticlimactic as major averages fell slightly. The selling picked up steam early Thursday as renewed concerns about Europe's debt crisis offset any positive impact of falling oil prices.

In recent trading, the Dow and S&P were down about 1.3% each while the Nasdaq was off 1.5%.

Such lackluster action is likely to continue in the near term, followed by something much worse for the bulls, according to cycle watcher Charles Nenner of the Charles Nenner Research Center.

"I think it's a bit late to go long," Nenner says, suggesting investors should not expect much more upside from stocks. For the near-term, Nenner expects the market to remain within a trading range between 1307 and 1356 on the S&P 500. (The S&P fell below 1307 early Thursday; a close below that level would mean "big trouble," Nenner says in the accompanying video, taped Wednesday afternoon.)

"We don't intend to go short right now," he says...with "right now" being the operative term.

Looking further out, Nenner is sticking with a forecast of "Dow 5000" over the next three years, a called based partially on his view that deflation remains the primary threat, not inflation. (See: Deflationary Hurricane Will Slam Into U.S. Economy, Charles Nenner Says)

"I would challenge people: 'how do you get to inflation?'," he says, suggesting wage pressures are the key determinant, not food or energy prices or even Fed policy. "What's clear is that wage demands lead to inflation; people want higher wages and then you get an upside spiral," Nenner says. "People are still happy they have a job, so I don't see any wage inflation, so it means there's no inflation" -- at least not in Europe and the U.S.

The Price of Prognostication

A former market-timing consultant at Goldman Sachs, Nenner has been lauded here and other venues for some of his prescient calls in recent years, most notably:

  • -- Forecasting a Dow peak of 14,500 in the summer of 2006.
  • -- Predicting a "substantial drop" in housing in Aug. 2006.
  • -- Calling the market top in October 2007.
  • -- Forecasting in late 2007 a "deflation scare" would occur in 2008.
  • -- In February 2009, predicted a major rally would start "in a few weeks" and could take the S&P as high as 1000.

But Nenner has had his share of clunkers too, including a forecast here that 2010 would be a grim year for both the economy and the markets. In April 2008 on CNBC, he was bullish about the second half of the year and predicted a return to old highs.

Hopefully Nenner's "Dow 5000" call will be similarly misplaced.

I point out these gaffes not to embarrass or make fun, but to remind viewers that to err is human and everything you see/hear should be taken with a grain of salt...assuming you're not already.

Aaron Task is the host of Tech Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com