Top technician Stephen Suttmeier explains a shocking seasonal trend that could lead to some serious pain for stocks into the end of the year.» Read More
The 10-year Treasury yield hit 2.84 percent on Thursday, the highest level in two months. And MacNeil Curry, the head of global technical analysis at Bank of America Merrill Lynch, warns that if yields continue to rise, it will be a very rocky ride for markets.
"If we take out 3 percent, we'll probably get a move up to about the 3.17, 3.30 area," Curry said. "And if we do it with some momentum, then it's going to cause quite a bit of panic."
If yields rise even higher, then more than panic will result.
"Where things would be truly unhinged, you'd need to see a break of, say, 3.6, 4 percent," Curry said on Thursday's "Futures Now." "If that were to transpire, you want to talk about volatility? It's going to be a different ballgame."
People are more interested in the concept of a "stock bubble" than they've been at any time since the housing bubble collapsed. But ironically, that very concern could be what prevents another bubble from forming anytime soon.
According to Google Trends, worldwide search interest in the term "stock bubble" is higher in November 2013 than in any month since October 2008. The rise in interest is even more pronounced in the United States, where in data going back to 2004, the volume of searches for the term is the highest it's ever been (with the exception of the bubble-period around November 2007.)
Paradoxically, many market participants say this should actually calm those who fret that equities are currently in a bubble.
"That means, conclusively, that there is no stock bubble," Jim Iuorio of TJM Institutional Services told CNBC.com. "It means that people aren't caught up in the hysteria of being deluded that there is no bubble, which is the only way that a bubble can exist."
Mark Dow, a former hedge fund manager who writes at the Behavioral Macro Blog, diagnoses investors with a bad case of "disaster myopia."
"If you went through an earthquake, or were mugged, or whatever traumatic event it might be, you overestimate the probability of that event occurring again," Dow said. "It's because we just went through a bubble that everyone's looking for them. Generals always fight the last war, and firemen fight the last fire."
Dow similarly believes that the tremendous deal of concern about a bubble will "probably prevent it," at least for a little while.
"It's never obvious, by definition, or you wouldn't get the bubble," he said.
(Read more: 3 technical reasons to be nervous about stocks)
As a horrible year for gold continues to get even worse, several traders say that we've just about reached the level where gold is good again. And as gold futures show even more weakness on Wednesday morning, several bears are just about ready to become buyers.
"The chart of gold still looks like it has more downside, and my near-term objective in December gold futures is $1,250," Jim Iuorio of TJM Institutional Services wrote to CNBC.com. "If that level gives way, I think we will sell to $1,200 rather quickly. But at that point, I would consider a long position."
(Read more: Gold extends losses ahead of Fed minutes)
Dennis Gartman, the editor and publisher of the Gartman Letter, has long been a fan of gold in yen terms, rather than in U.S. dollar terms (which just means selling Japanese yen to buy gold). But while he's not yet interested in owning gold outright, further declines could make him change his mind, he said Tuesday on CNBC's "Futures Now."
"What's it going to take for me to get bullish of gold in dollars? Probably another violent selloff on a Friday," Gartman said. "We've seen Friday after Friday after Friday where people just throw up their hands. Give me one $50 break on the downside in gold, and you might entice me into the market at that point."
With stocks near all-time highs, John Kosar says that the market has moved too quickly and that some elements now suggest that a correction could come soon.
"I'm a little nervous up here," the technician told "Futures Now" on Tuesday. "There are a lot of indicators we're looking at, including investor sentiment, that are about as frothy as they've been in about 10 years. So I think there are a lot of little thing that, as you add them up, show that you need to be careful up here."
Reason No. 1: Investors are too bullish
The market's extreme bullishness is a "contrary indicator," said Kosar, director of research at Asbury Research. He noted that the Investors Intelligence Survey shows an outsized number of bulls.
"This is about as bullish as this group has been," he said. "When these people are all on the boat, oftentimes the boat's getting close to tilting."
Such extraordinary sentiment often occurs just before a drop in the market.
The S&P 500 is poised to cross above 1,800 and keep on ticking, powered by the momentum that's kept bulls happy all year.
Equities are in the green, being led higher Monday by emerging markets after good data out of China. Even more significant were comments that the Chinese government will encourage more private investment in state-controlled industries in an attempt to help spark the economy. This declaration was greeted enthusiastically by Asian markets, and the optimism spilled over into the S&P futures.
With the market nervously wondering whether the Federal Reserve will start to reduce their quantitative easing program, a few critical clues could come this week. Between Chairman Ben Bernanke's speech on Tuesday night and the release of FOMC minutes on Wednesday, investors will seek to determine whether a December taper is now on the table.
In addition, the intense, taper-related scrutiny of the jobs market will give Thursday's initial jobless claims data an added importance.
"The week, we really want to be focused on the typical Fed kind of talk—but I also want to look at that jobless claims number, because the Fed is very dependent on data for their December meeting," said Jeff Kilburg of KKM Financial. "So keep an eye on all the data points once again."
George Goncalves, the head of U.S. rates strategy at Nomura, expects the minutes from the Federal Open Market Committee's October meeting to be much more revealing than Bernanke's Washington speech.
"We believe that Bernanke will continue to emphasize the committee views and be more balanced, so as not to steal the thunder of Janet Yellen as she takes over eventually," Goncalves wrote to CNBC.com. But "the minutes could be revealing, because the last meeting statement was perceived on the hawkish side, so any insights on the Fed's next steps and their thoughts on fiscal issues will be keenly watched."
All eyes are on the Fed's December 18th statement, which will be followed by a press conference. Just a week before Christmas, the Fed could finally make the long-awaited (and long-feared) announcement that they will reduce the pace of their $85 billion-per-month bond buying program.
(Read more: You're wrong—QE has not boosted stocks: McKinsey)
A debate is brewing on Wall Street about emerging markets. On one side are the bears, who say that the Federal Reserve's expected tapering of its quantitative easing program in 2014 will make next year a very difficult one for the emerging markets. On the other side are the bulls, who say that the Fed's effect on the emerging markets has been badly overblow.
"For 2014, we are very worried on emerging markets," Patrick Legland, Societe Generale's global head of research, told CNBC's "Futures Now" on Thursday. "They have benefited from low interest rates, negative real interest rates, but virtually, this is the end."
Yet emerging market bulls like Tim Seymour of Triogem Asset Management say emerging markets haven't been the gigantic beneficiary of QE that many may think.
"I don't think it's as easy to say that if the dollar strengthens and rates start to go up, you can be resolute in saying that emerging is going to sell off," Seymour said. "How much money has flowed into emerging market equities on the back of QE? Not a lot."
Similarly, Zachary Karabell of River Twice Research says that QE's economic impact on growing economies has been massively overstated.
"The emerging world is not emerging just in past two years of QE," Karabell told CNBC.com. "So while financial markets may get roiled by the momentary decision to begin to start tapering, the EM growth story did not emerge from Ben Bernanke's brow coming full-formed like Athena from the head of Zeus."
(Read more: You're wrong—QE has not boosted stocks: McKinsey)
Equities are the gift that keeps on giving. The one problem with the market right now? You never feel that you are long enough!
Just take a look at the December S&P e-mini, it has tested above and held the next pivot level of 1,785, as it stretches toward 1,800. The Friday morning low is 1,786.50, as the market keeps climbing and enjoying higher highs.
(Read more: The deceptively simple reason stocks won't quit)
Investors have all the assurance that they can hope for that there will not be any trimming of bond purchases by the Federal Reserve next month. What does this mean? It is still game on, and investors should buy equities that they expect to perform well over a Christmas rally.
Many credit the Federal Reserve's quantitative easing program for the stock market's 25 percent rally this year, but a new research report from the McKinsey Global Institute suggests that the impact of QE on the market has been badly overblown.
Rather than looking to the low interest rates fostered by the Fed, the main author of the report, Richard Dobbs, says that stocks have rallied on the back of stronger corporate fundamentals.
"The market is not being driven up by QE," Dobbs said on Thursday's episode of "Futures Now." "The reason the market's up is that profits are up and that cash levels are up in companies."
Dobbs, who is the London-based director of the McKinsey Global Institute, said that the market has been fooled by the short-term reactions to QE-related news.
"If you look at the announcements of QE programs ending or being continued, you do get short-term movements," Dobbs acknowledged. "But if you look at the following week, those moves get unwound. So we're not seeing the short-term thing sustaining."
(Read more: For Fed Chair Yellen, it was a perfect hearing)
But what of the oft-made argument that by squashing interest rates, the Fed's QE program leads investors to exit bonds and seek out a higher return in stocks?
In the Wednesday report, entitled "QE and ultra-low interest rates: Distributional effects and risks," Dobbs and his co-authors write that this rationale only makes sense "if investors see equity investment as a true substitute for fixed-income investment. There are reasons to believe that this is not the case. For example, equity markets have been highly volatile since the start of the crisis, which in all likelihood should persuade many fixed-income investors to avoid investing in these markets."
The Francis Bacon painting "Three Studies of Lucian Freud" was sold for a whopping $142.4 million as part of a $691.6 million Christie's sale on Tuesday night, making it the most expensive work of art ever sold at auction.
Some argue that the sale is giving us a message about inflation that investors aren't getting from the action in gold, the Dollar Index, or the government's official consumer price index data.
"Asset inflation took another leg higher last night," wrote Peter Boockvar in a Wednesday morning note. "Thank you Federal Reserve, and thank you Bureau of Labor Statistics for not including art in the consumer price index."
The traditional measures of inflation have shown little decrease in the value of a dollar. The Dollar Index, which tracks the dollar against a basket of four other currencies, is barely higher on the year. Gold, which is thought to track inflation, is 24 percent lower. And the consumer price index produced by the Bureau of Labor Statistics shows only a small increase in 2013.
But Francis Bacon inflation is booming. In May of 2008, another Bacon triptych (meaning a three-panel piece of art) was sold for a mere $86 million. And while every work is different, the fact that the more recently sold triptych garnered 66 percent more money is notable.
By contrast, the CPI has only increased by 9 percent since then (though it may be worth noting that the price of actual bacon, a CPI component, has risen by 56 percent).
"It's indicative of the time," Boockvar, the chief market analyst at the Lindsey Group, told CNBC.com. "Stocks and bonds and rare comic books and high-end New York City apartments are all doing the same thing. What we're seeing is massive asset price inflation generated by what the Fed is doing. And while they continue to want us to look at the lack of consumer price inflation, asset price inflation is just inflation under a different name."
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