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Look to the stock market to see who will be the next US president

Swings in the stock market are foretelling moves in presidential polls, according to Tom McClellan, technical analyst and editor of the newsletter The McClellan Market Report. If you want to know who will pull ahead in the 2016 election, he said, look to equities.

"The stock market movements tend to lead the changes in the poll numbers by about a week," McClellan told CNBC's "Squawk on the Street" on Wednesday. "If you see a movement in the Dow or the S&P or your favorite index, you're likely to see the same movement show up about a week or a week and a half later in the poll numbers."

McClellan compared major U.S. indexes and polls from RealClearPolitics, and found that the two move in lockstep. He started comparing them in the 2000 election, and found that numbers become accurate when daily polling begins closer to November.

Former Secretary of State Hillary Clinton became the presumptive Democratic presidential nominee Tuesday night. McClellan pointed to the corresponding Dow Jones industrial average, which has moved higher in the past two weeks as Clinton gained ground.

"If the market moves up, that tends to benefit the incumbent in the last elections," McClellan said, adding that Clinton, the way the model works, is being viewed by the market as the incumbent.

"If the market bids up people tend to feel better about it, and if people are feeling good they like the guy who's in office more."

Source: The McClellan Market Report Newsletter

Conversely, he said, people tend to blame whoever's in office when they're "feeling bad" or the markets dip.

"If you see the market head downward, which I'm expecting after a top in early July, that would presumably go in Trump's favor," McClellan said.

This market theory presents a quandary for Republicans, he said.

"If you're a Trump supporter but you're also an investor do you want the market to go down so Trump can do better, or do you want the market to go up so you can do better?" McClellan said.

October should bring more clarity for election results and in turn, for the stock markets.

"An unknown risk in Wall Street's view is bigger than any actual risk," McClellan said, adding that the November election is one of the biggest "unknowns" at the moment. "Once it clears up and it becomes evident how it's going to turn out, the market can focus back on investing and earnings and we should have a bullish 2017."

McClellan is upbeat overall on equities but said he could go short-term neutral if the S&P heads much lower this week. For gold though, he's neutral short term and bearish on the intermediate. He said commercial gold traders are now at a high net short position, and have been continuously short since 2001.

"Whenever you see a really high net short position, the smart money is betting on a decline in gold prices and the smart money is usually right in the long run."

Source: The McClellan Market Report Newsletter