One Bank of America technical strategist says history is implying a big move up for the S&P 500. » Read More
By: Annie Pei
One of the Street's top strategists believes the bull market isn't on its last legs just yet. » Read More
That assessment comes from Bank of America-Merrill Lynch Global Research's head of high yield and relative value strategy, who saidFederal Reservechair Janet Yellen and her global central banking counterparts have been reduced to little more than high ranking babysitters.
"A Peter Pan economy is an economy that just doesn't want to grow up," Michael Contopoulos recently told "Fast Money."The central bankers of the U.S., Japan and Europe "are like three nannies managing the economies. And, that's what they're supposed to be doing.
Speaking about the central banks' mandate for price stability, Contopoulos added: "If you think about it, their job is to spur inflation and growth. It's to baby the economies forward. It's just not happening though."
The analysis coming as the ten-year Treasury note yield fell to multi-year lows this week, breaking the 1.60 percent mark. Meanwhile, the Fed decided leave interest rates unchanged.
"I think rates could go lower. You have ten trillion of negative yielding assets globally. Treasuries, U.S. investment grade and U.S. high-yield are virtually some of the only assets available right now with a positive yield," said Contopoulos, who drives the firm's view on cross assets and the high yield and loan markets. "Fundamentals are weak."
As gold hit the highest level in nearly two years, one technical analyst is certain that major gains are in store for the precious metal.
"Gold is going to $1,450," Zev Spiro said on "Futures Now" on Thursday, a day on which gold rose as high as $1,318 before retreating back below $1,300. Gold was around $1,296 on Friday afternoon, up about 1.5 percent this week and on pace for its third positive week in a row.
"Once we get to $1,306 to $1,308 and hold, I suspect we can push higher within two to three months."
Spiro looked back to March, when prices moved above what he described as a two-year long descending channel. At that time, "the breakout signaled higher prices with a minimum price objective in the $1,450 area," he said.
He also explained that prices could extend beyond this minimum objective to test the $1,525 to $1,550 area, "which was a level of support from 2011 to 2013, that is now overhead resistance."
Ultimately, Spiro believes the landscape for gold remains positive because of the sell-off in May, when prices tested and held above a key range of $1,190 to $1,205.
"The hold of that support reinforced significance of the $1,190 to $1,205 level and it led to the sharp rally we've seen over the past two weeks," he said, noting that gold prices have rallied nearly 7 percent in June.
Spiro also said gold moved above a key level of resistance that's formed by connecting the highs from January and May, when gold prices surpassed $1,308 and $1,306, respectively.
"If we get a hold above $1,306 to $1,308, that would confirm a breakout above this level, which would be positive and signal a continuation of the larger uptrend," he said.
Spiro also said that in the coming weeks, "digestion" of a rally is healthy, and that there may a brief short-term consolidation before a breakout.
For investors anxiously awaiting Wednesday's Fed announcement, Peter Boockvar has a clear message: Your fears are misplaced.
The managing director and chief market analyst at The Lindsey Group explained that a rate hike in June or in July is unlikely. Furthermore, he reasoned that traders should look across the pond to the U.K. if they're in need of reasons to worry.
"The market has tossed the Fed aside," said Boockvar. "They've been mugged by the reality of the global economy continuing to shrink."
The Brexit vote is just eight days away and favorable sentiment toward leaving the European Union continues to grow within the U.K. As it stands, Boockvar described a British departure from the EU as an occurrence that would create a dangerous ripple effect across global markets in the near term.
"If the Brits vote to leave, it can take two years for it to physically happen and so much can happen within that time frame," said Boockvar, who predicted that Italy, Spain and Portugal could also follow the U.K.'s example. From here, he fears that a mass exodus from the EU could trigger a global recession. This belief stems from the notion that the bloc has established rules that do not entice member countries to want to stay.
"Think about the euro. It actually was a great idea. If I'm Italy and you're Spain we can do business," noted Boockvar, who says that ease of conducting commerce in Europe no longer exists because of bureaucracy. "They need to decentralize power out of Brussels and give it more to the individual countries."
He also blamed the European Central Bank for "mucking things up" and racking up serious debt in efforts to establish a one-size-fits-all monetary policy in Europe.
"To me, the ECB is the biggest threat to this whole experiment," said Boockvar, who added that it's near impossible to find a common financial platform for countries like Germany, France, Italy and Greece to operate across.
Additionally, Boockvar remains skeptical of Europe's ability to ease the potential panic on a "leave" vote as he feels that the general public has become repulsed with today's leadership.
"What we're seeing with central banks, our own presidential election, in the U.K., potential in the vote in Spain is disgust with the establishment," said Boockvar, referring to the general election in Spain. Now, with people losing their faith in central banks, he sees monetary policies losing a grip on their ability to maintain calm in the marketplace.
An unusual trend has emerged in the stock market, and there's an 80 percent chance it could lift stocks higher within the next month.
That's the latest call from FBN Securities Chief Market Technician JC O'Hara, based on his tracking of a phenomenon regarding the length in time in between so-called distribution days.
"A key distribution day is when ... there are five times as many decliners as there are advancers — as well as five times as much volume in the declining stocks as in the advancing stocks on the day," O'Hara said Tuesday on CNBC's "Futures Now." "When those two conditions are met, you have what we call a 'distribution day.' So, the markets traded 44 days, that's roughly two months without a distribution. Now, to put those 44 days in perspective, the market typically has a distribution day every nine days. "
While the definition is highly technical, the gist is that a distribution day is a session in which it appears that large holders of stock are selling. Those who track them believe that they lend insight into what large investors are doing, which could inform how the market is likely to behave.
After that long 44-day dry spell, an interesting thing happened. The S&P 500 saw two distribution days in a row on Friday and Monday.
"We went back in history and said what happens if you go two months without a distribution day, we have back-to-back distribution days — how does the market react?" he asked.
The answer: a short-term drop followed by intermediate-term gains.
O'Hara, who calls himself bullish, says it's important to watch how the bulls react to any potential pullbacks — since it's been a relatively easy ride for them over the past three months.
If the bulls are resilient and bounce back quickly, then it's a sign that the markets are in a very strong place, he said.
He predicts the S&P 500 could move 6.5 percent higher within a month, putting the index at 2,200.
As gold continues to rally in 2016, one of Wall Street's most closely followed commodities watchers says we could be in the early days of a historic rally for the precious metal.
However, the catalyst for gold's gains could stem from a nerve-wracking sequence of events.
"We should expect the next global financial panic soon," said Jim Rickards on CNBC's "Futures Now" last week. "We have imploded twice in the last 16 years so get ready for the third one."
Rickards has penned numerous New York Times best sellers on the relationship between commodities and currencies. His latest book, "The New Case for Gold," defends the rationale that gold always has been, and always will be, a true safe haven during volatile times. He therefore urges investors to think of the commodity as insurance, not an investment.
He cited the financial meltdown of 2008, where U.S. banks teetered on the brink of collapse before the government's multi-billion dollar bailout. Before that, in 1998, Wall Street bailed out Long-Term Capital Management when it collapsed.
Rickards explained that, given the consistency of a financial panic every 10 years, investors should brace for another disaster in 2018. Yet, this time around, Rickards believes that its the U.S. government itself that may trigger the next crisis.
Gold, crude, stocks and bonds are rallying in lockstep, and that has created a very tricky trading environment, according to one market watcher.
Nations said that while the stock market is tethered to a lesser degree to the dollar, oil remains a main driver for equities. "That means there's no way to pick out a unique setup that is moving on fundamentals and has some technical momentum we can take advantage of."
The market has seen explosive moves across many asset classes of late. In the last three weeks the S&P 500 gained more than 4 percent and climbed within a hair of its all-time high, while crude oil is up 7 percent in the same period, steadily trading above $50 for the first time since last July. These moves coupled with gold soaring more than 5 percent since the start of June and Treasurys sitting near year-to-date highs has Nations taking a second glance at the market.
"The fact that nearly everything is at or near a critical level" makes it difficult to trade, said the founder of NationsShares and a CNBC contributor. "It makes it like a coin flip, an expensive coin flip."
As a result of the unpredictability, Nations said he is reducing his positions and closing lower conviction trades right now.
The market is getting the timing of the Fed rate hike wrong, and it could deliver a big blow to stocks, according to one hedge fund manager who's turned negative on the markets.
"The Fed funds futures are pricing in less than a 40 percent probability of a hike by the September meeting. and only a 59 percent probability of a hike this year," Matarin Capital co-founder and hedge fund manager Nili Gilbert said recently on CNBC's "Futures Now. "That is a pretty low probability given what we are seeing with a rebound in cyclicals, materials and energy."
Wall Street firms BNP Paribas and IHS Global Insight predict that a rate hike won't happen until late this year at the earliest. But while there's a markedly low chance it will happen at next week's Federal Reserve meeting, Gilbert makes the case the markets will see one as early as July.
"We actually think that the Fed may be more likely to raise rates this year than what is currently being discounted in the market, and that's because we believe that future inflation may make it increasingly difficult for monetary policy in the U.S. to remain as accommodative as it is today," she said.
Gilbert's firm, which has $740 million in assets under management, has a long/short strategies fund that claims the ability to navigate "any market," and a separate futures portfolio.
Now she's cautious and holding a large cash position.
"Our stock market outlook is somewhat negative for most countries, and that's because we expect that if the Fed has to increase rates earlier or more than what is expected, then it's going to be quite a negative surprise," she said.
The other major element she's watching: Whether Britain will decide to leave the European Union.
"The markets really haven't priced in much of a probability of Brexit," said Gilbert. "If there were a Brexit in the near term, there would certainly be a lot of uncertainty, a lot of volatility, and that just doesn't seem to be priced into the markets right now. So it could be very unsettling."
The Federal Reserve may be in a box when it comes to conducting monetary policy — a scenario likely exacerbated by disappointing jobs report numbers released last week.
Just 38,000 jobs were added to U.S. payrolls in May, the weakest performance in nearly six years. The data stoked new fears about the economy's health, and threw cold water on the Fed's recent hints at higher rates in the coming months.
"Friday's data again pushes back decisions," said Saxo Bank chief economist and chief investment officer Steen Jakobsen told CNBC recently. "The ability of the Fed to move now is almost entirely based on their 'need' or 'want.'"
Late last month, Fed chief Janet Yellen said in a speech that an interest rate hike was "appropriate" in the near term, and could rise gradually. With that in mind, Jakobsen argued the Fed has painted itself into a corner, as well as other central banks around the world.
After oil touched $50 per barrel for the first time since November, investors remain focused on the potential outcome of this week's OPEC meeting in Vienna. However, one of Wall Street's most closely followed analysts has a clear message: The event is meaningless.
"I see nothing of consequence that will be discussed at this meeting," Tom Kloza said Tuesday on CNBC's "Futures Now."
The global head of energy analysis at the Oil Price Information Service is adamant that no progress was made between Saudi Arabia and Iran during OPEC's last gathering in Doha, Qatar. Therefore, he believes that the table is not set for any sort of announcement regarding a freeze or cut in June.
"One can argue that OPEC is no longer a cartel, at least in the classic sense of a cartel having influence over supply and prices," noted Kloza in a note. So, with OPEC irrelevant in Kloza's eyes, he has turned his attention to the Federal Reserve as a key factor regarding the price of oil.
"There's no question that higher interest rates and less easy money are going to complicate the oil business," he said on "Futures Now."
The S&P 500 is in an unusual rut: It hasn't reached a new high in more than a year.
This scenario has only happened 16 times since World War II, and it's generally been seen amid deep market corrections. But investors might want to think twice about throwing in the towel.
"We looked at cases when you went this long without a new one-year high, and it's actually quite rare," Ed Clissold, chief U.S. strategist at Ned Davis Research, said recently on CNBC's "Futures Now." "There's a big dichotomy depending on how big the market declined during that one year walk through the wilderness."
The S&P last hit a yearly high — and an all-time record — of 2,134.72 on May 20, 2015. Since then, the index has fallen as much as 15 percent without hitting a new high. But Clissold doesn't find this alarming.
"If there was a really big decline greater than 20 percent during that one-year period, which is a classic bear market, actually the market really struggled after that," he said.
History shows that bigger declines have foreshadowed longer periods of recovery and smaller gains over the next year, while smaller drops have led to quicker returns to new highs and bigger gains over the subsequent year, according to Clissold.
He also points out that sentiment gauges he follows closely have shown a high level of pessimism — more than one might expect given the "small decline" we've had over the past couple of months.
"I think that would bode well for the market eventually working its way higher and breaking out to new highs," he said.
And if the Federal Reserve raises interest rates by a quarter point within the next couple of months, Clissold believes it could actually push stocks even higher.
"July seems to be more likely [than a June rate hike]. So once that uncertainty clears up one way or the other in the grand scheme of things, one rate hike probably isn't going to kill this market. So you get that uncertainty lifted and the market could move higher from there," he said.
He sees the S&P ending the year at 2,200, 5 percent above Tuesday's closing price.
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