The Bears are Back in 2016... Are You Ready?

They say the last week of the year is supposed to be an easy one…

But not this year. If you were looking for a big bowl of gains over the holidays, you went without. Just like Seinfeld’s Soup Nazi, skittish traders couldn’t get their act together when it came time to place their orders. In turn, Mr. Market turned ‘em away with an empty bowl.

No soup for you!

A Santa rally failed to bring any holiday cheer for the major averages—just more choppy trading action. The last week of 2015 was just like the other 51 weeks of the year: directionless and disappointing for a majority of stocks.

The S&P fizzled on New Year’s Eve to drop the big board into the red for 2015. It was the perfect finish to a frustrating year.

But now it’s a new year. And this week, you’re going to see how I see the market shaking out in 2016.  Some of my visions of the not-so-distant future might even surprise you.

Let’s quickly review 2015 first…

If you bet on an energy comeback, you probably had to sell your bowl and spoon just to keep the shirt on your back. While market pundits continue to bicker over whether the oil rout has been “good” or “bad” for the economy, its effect on the market couldn’t be any clearer.

2015 in One Chart

Reuters reminds us that 8 of the 10 worst performing stocks in the S&P in 2015 were energy companies. And with energy stocks in free-fall most of the year, you might be wondering just how the heck the S&P managed to post what we would consider a tiny loss in the grand scheme of things…

You won’t have to dig too deep to find the answer. While energy tanked 2015, it was the big consumer stocks that stole the show. In fact, they were the show. As market breadth retreated, popular names like Netflix and Amazon more than doubled. This helped prop up the major averages during a year where most stocks failed to deliver for investors…

So the Soup Nazi market of 2015 is finally finished torturing the investing class. Or is it? The calendar might have flipped to a new year—but the same ol’ problems are plaguing this market. Heck, futures are deep in the red as I type this morning, thanks to a 7% rout overnight in the Shanghai index that sparked circuit breakers and stoked more emerging market fears.

But the show must go on. It’s prediction season. That means it’s time for us to guess some of the most powerful market moves of 2016. I’ll spend the rest of the week revealing your 2016 trades of the year. So buckle up. 2016 is about to begin with a loud growl from the bears…

Sincerely,

Greg Guenthner
for The Daily Reckoning

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The Daily Reckoning