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posted on 27 December 2015

A Painful Epiphany Looms In 2016

by Rick Ackerman, Rick's Picks

Pat as this may sound, I expect stocks to continue their boring waft higher in the final days of 2015. I am not predicting any particular strength, only more of the same - i.e., a rally that will deftly exploit seasonality, but without achieving new record highs. Look for short-covering to carry the load, since bears left themselves badly on the ropes when last week ended.

bear.sleeping.380x169

Ordinarily, I'd expect them to get squeezed to the point of bloody capitulation, for two reasons: 1) we have yet to see the parabolic blow-off that would put bears out of their misery; and, 2) the calendar will be working strongly against them. However, a year-ending blow-off is by no means a given, simply because last week's running start, which exceeded no important prior peaks, was not powerful enough to put the fear of the Lord in bears.

Click for large image at Rick's Picks.

djia.weekly.2015.dec.24.600x400

If I am wrong and the broad averages rocket to new all time highs, we should be prepared to short into the rally in the final day(s) of the year. Although the economic recovery 'story,' buttressed by the Fed's foolish eagerness to tighten, may have been strong enough to attract some go-along buyers in December, the story itself, as most of us have long understood, is a fraud that flouts common sense. As a result, rather than getting legs that extend the bull market into its eighth year, the 'story' is fated to succumb to grim reality in 2016.

The whys and wherefores should be obvious to anyone who shopped in the malls over the last month or so: they are busy but - and this is ominous - noticeably uncrowded. In my neighborhood, a Best Buy store that seemed to be doing everything right closed before Christmas. This shopping season will go down as the coup de grace for big-box stores in particular and for brick-and-mortar retailers in general. For an economy that generates more than two-thirds of its GDP from consumption, this is creative destruction on a colossal scale. Soon it will lay bare the lies that have sustained the Fed's crackpot monetary policies.

A painful epiphany awaits investors in 2016, and we should take diligent steps to prepare for it as the year winds to a close.


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