Bank of America technician Stephen Suttmeier explains why weak seasonals and tactical complacency could mean trouble for stocks heading into next month. » Read More
Even after a tumultuous year, the S&P 500 ended 2015 nearly flat. However, technician Jonathan Krinsky says stocks won't be so fortunate in 2016.
Markets kicked off the new year with a steep sell-off, with major U.S. indexes falling about 1.5 percent this week. But even as the S&P 500 has stalled, Krinsky pointed to weakness in the broader S&P 1500 index as a warning sign for large-cap indexes.
"We're moving sideways overall, but the internals are weakening. Nearly half of the S&P 1500 is down 20 percent from its 52-week highs, so you could almost say that half the market is already in a bear market here," the MKM Partners technician said Tuesday on CNBC's "Futures Now."
Another bad sign, Krinsky said, is the absence of a "Santa Claus rally" at the end of 2015.
"Since 1985, there have been just seven negative Santa Claus rally periods, and for four of the seven years, the next year was down and that included two of the bear markets in 2000 and 2008," he said.
And while Krinsky said history provides more of a guideline than a hard-and-fast rule, the addition of internal weakness will weigh even more on the S&P 500 this year. The major U.S. index has been making lower highs and lower lows in recent months, he said, a sign that large-cap stocks are following smaller-cap stocks down.
Krinsky said the next level of support for the S&P 500 comes in around 1,870, a 7 percent drop from where the index traded on Tuesday. A break below that could mean an even more drastic plunge for stocks, he said.
"If we get to the 1,870 level and we don't see a meaningful rebound with breadth and volume off that level, you're probably looking at something with a 17 handle on the S&P," Krinsky said Tuesday.
A drop to, say, 1,799 would represent a 10.7 percent drop for the S&P 500.
You know it's grim when a sector's primary bull case involves bankruptcy.
Unfortunately for those in the base metals space, "that's the situation we find ourselves in," said Edward Meir, senior commodity analyst with INTL FCStone.
The just-concluded year of 2015 is one that base metals investors will desperately want to forget. Amid a dour environment for commodities overall, these industrial metals were among the hardest hit. Aluminum slid 11 percent, copper was down 24 percent, nickel dropped 42 percent, and precious-metal-with-industrial-uses platinum fell 26 percent. With that in mind, observers warn not to expect much in the way of a reprieve.
The twin problems for the space are a glut of supply and a dramatic slowing of demand, mostly due to a slowing Chinese economy — conditions that are unlikely to change merely because the calendar has turned.
As 2015 comes to an end, many on Wall Street are placing their bets on what could happen in the markets next year. But according to one strategist, an unforeseen collapse in the dollar index could not only send ripples across the entire market, but "change a lot of playbooks for 2016."
"Everyone seems to be on the same side of the boat when it comes to the dollar, thinking that long term it's going to go higher," Matt Maley told CNBC's "Futures Now" on Tuesday. He noted that with an improving U.S. economy and Federal Reserve tightening — while many other central banks are easing — the bull case can easily be made for the dollar. "But a lot of people forget that the high in the dollar was actually way back in March."
The dollar index has traded in a sideways range for much of 2015, seeing returns of more than 8 percent year to date, with much of those gains having occurred in the first three months of the year. The index hit a closing high of 100.18 in March and retested that level earlier this month, forming what Maley, managing director and equity strategist at Miller Tabak, said could be a double top.
"The last three times the dollar made a double top has been followed by a significant or even major sell-off," he said.
As investors hope for a Santa Claus rally, one technician says jolly old St. Nick won't be able to save stocks from a correction in 2016.
"Our conviction lies that if you do get some seasonal year-end strength here, you want to sell into it," Oppenheimer's Ari Wald said on CNBC's "Futures Now" on Tuesday. "For the S&P 500 we are expecting a correction in the first quarter — that's where our conviction lies."
According to Wald, a correction could be attributable to three main points:
"So for the S&P we expect a correction to 1,900 support, in the coming months," Wald said. "This would mark the lower end of the index's channel connecting the 2014 and 2015 lows."
While Wald does view this as a secular bull market with below-average recession risk, he says a bull market correction would provide a few buying opportunities — especially large-cap tech.
"Large-cap growth in particular is a theme that's worked, it's a theme that continues to work. We think this premium gets placed on growth companies in a low growth world," said Wald. "We think large-cap tech is the sector with the best exposure to that theme. And when you look at the tech sector's relative trend to that of the S&P 500, we see a sector that is still retracing very stark under-performance suffered between 2000 and 2002."
The S&P 500's tech sector has rallied more than 7 percent in the last three months.
"We think that ultimately tech is the area of the market you want exposure to," Wald said.
Since the launch of the CNBC program "Futures Now" in October of 2012, one of its most frequent guests has been Peter Schiff, who runs both investment advisory Euro Pacific Capital and precious metals dealer SchiffGold.
In these appearances, he has made a series of brash (often bearish) predictions, which tend to generate a great deal of attention and provoke strong emotions.
Following yet another set of bombastic statements on last week's episode, CNBC felt it may be high time to use the benefit of hindsight to assess the wisdom of some of his more eyebrow-raising prognostications. Some of those predictions were made when he appeared on the program toward the end of its first month — on October 25, 2012.
Schiff's call: Gold will rise to $5,000 within a few years
Like most prominent gold bugs, Schiff is a sharp critic of lax U.S. monetary and fiscal policies, which he maintains will eventually weaken the dollar and lead investors to snap up bullion as a safe haven.
"Gold's got only one direction to go, and that's higher," Schiff said in October 2012. "People are going to be shocked at how inexpensive gold was" when it was trading at $1,700.
In that interview, Schiff called for gold to rise to $5,000 in a "few years"; when asked about the time horizon for this target, he replied: "I think you're going to see a big move sometime in the next couple of years."
Made when gold was trading about $1,700, this prediction may count among the least prescient ever made on CNBC.
Following a dramatic crash in April 2013, gold was trading at $1,316 a year later; a year after that, gold was trading at $1,230.
When asked about his prediction in October 2014, Schiff granted that "obviously it's going to take a little bit longer than what I believed at the time," but went on to predict that "it'll go through $2,000 very quickly, and people will be upset that they didn't buy gold at $1,700."
That prediction, too, has turned out to be flat-out wrong. Rather than quickly moving higher, gold has continued its slow move lower, and ended trading on Friday around $1,060.
In a long series of emails with CNBC, Schiff maintained that his $5,000 gold call has not yet been proven incorrect.
"I never specified that gold would hit 5000 in two years," Schiff wrote. "You can say that Schiff thought gold would make a big more [sic] in two years . He was right, but the move was in the opposite direction."
The investor also hedged on the original time frame he gave.
"A few could be 3, but it could also be 4 or maybe 5," Schiff wrote. "The marines are looking for 'a few good men.' They are certainly looking for more than two. I used that word specifically to be non descriptive as I did not know exactly how long it would take for gold to hit 5000."
He further points out that he's been bullish on gold for more than a decade, which has also entailed making bullish calls at lower prices.
Schiff's call: The dollar will crash
In the same interview, Schiff laid out what had been his primary bullish case for gold — that Federal Reserve policies would cause a rapid decrease in the dollar as compared to other currencies.
"I think ultimately, the dollar index will be cut in half, at a minimum," he said.
Actually, dollar strength has turned out to be one of the biggest market themes of the past few years. The dollar index, which compares the U.S. dollar to a basket of other currencies, was trading at 80 that day, and hasn't fallen lower than 78.90 since. On Friday, that index closed near 99.
Meanwhile, inflation has hardly run rampant. Instead, several different metrics show that inflation has remained below the Federal Reserve's 2 percent target, even as the central bank stopped its bond purchasing program, and even more recently has raised its interest rate target.
On this front, Schiff is once again doubling down. He told CNBC Friday that "the dollar will crash, just from a higher level, and the collapse will be that much greater now as a result of the huge sucker's rally we've had."
Gold prices plunged more than 2 percent Thursday on the heels of the first Federal Reserve interest rate hike in nearly a decade. The commodity is now sitting near its lowest level since 2010, and with 8 ½ trading sessions left in 2015, the commodity is on track for its third straight year of losses — which would be the longest losing streak since 1998. But despite the horrid returns, one noted gold bug is sticking to his claims that the commodity could soon surge.
On CNBC's "Futures Now" Thursday, Peter Schiff stood behind his previous call that gold will reach $5,000. "It's still going to go there," said Schiff when he was asked about his uber-bullish prediction. "I don't think there's that much downside [in gold] because I think most of this is already built into the price," he added.
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