Top technician Louise Yamada sees some troubling signs in the chart of the S&P 500, says the six-year market advance is now over.» Read More
The bad news for commodities could be spreading.
As gold, oil, copper and other commodities tumble to multiyear lows, one expert says the turmoil is far from over. In fact, he said the collapse could mean that a full-blown market correction is just around the corner.
"We're looking at real weakness in the stock market here in the U.S.," Andrew Hecht said Tuesday on CNBC's "Futures Now." "We've had a really good time in that market, and I think it's overdue for a correction."
Hecht, author of "How to Make Money with Commodities," said he's watching three commodities markets in particular: copper, oil and lumber. Hecht said copper is especially signaling a global slowdown, most notably in China.
Copper has fallen almost 17 percent this year to new six-year lows. Crude oil is down about 14 percent year to date, but saw a brief rally of 2 percent on Tuesday. Lumber has fallen about 22 percent this year.
Hecht said although August will see some volatility and bounces in commodities markets, there's still a lot more downside risk in all raw materials.
"We'll see a lot of moves like we're seeing in crude oil today, but I think once September, October settles in, we'll see another leg down in these commodity markets, and that does not bode well for equity markets in the U.S.," Hecht said.
"There's so much telegraphed to the downside, but we haven't even had one ounce of good news, and I think you need something going to get [a bottom] started," Stutland said Tuesday.
"The commodities market since 2011 has been making a series of lower highs and lower lows and I think that's going to continue," Hecht said.
For publicly traded companies, beating earnings expectations just isn't what it used to be.
Companies that have beat both earnings and revenue estimate this earnings season have seen their stocks jump just 1.5 percent on average, according to RBC's market strategy team. That compares to an average rise of 1.9 percent.
Similarly, FactSet senior earnings analyst John Butters notices that companies beating just earnings estimates (but not both earnings and revenue) have seen their stocks rise only 0.8 percent in the period starting two days before the report, and ending two days after. That's below the 1 percent average rise over the past five years.
An even more dramatic nonchalance can be seen around earnings misses. In the two-days-before-to-two-days-after period, companies that have missed earnings have tended to see a drop of 1.3 percent, versus a 2.3 percent drop on average, according to FactSet.
It's worth noting that RBC doesn't notice a similar trend for companies that have missed both revenue and earnings estimates—those stocks have tended to fall 3.1 percent this quarter, the same amount as in quarters prior, according to their numbers.
Gold just can't get a bid.
The precious metal fell near 5½-year lows on Thursday after the second-quarter GDP number showed the U.S. economy is growing at a steady rate and comments from Fed Chair Janet Yellen on Wednesday pointed to the notion of a September rate hike.
Gold is now down 13 out of the past 15 trading sessions, and according to one highly regarded technician, it's about to get even worse.
"I think we have to recognize that gold is in a structural bear market," Louise Yamada, managing director of Louise Yamada Technical Advisors, said Thursday on CNBC's "Futures Now."
Gold is down more than 8 percent this year and is on track to notch its third straight year of losses. "It broke down in 2013, exactly the year that the S&P 500 and the market broke out into what we define as a structural bull market," said Yamada, who noted that stocks and gold tend to move inversely.
Energy stocks just notched their second-best trading day of the year.
The S&P energy sector rallied 3 percent Tuesday as crude oil snapped its five-day losing streak and bounced off a four-month low. And according to one top technician, the rally is just getting started.
"We came into [this rally] extremely oversold, about the most oversold we've seen since early April," Jonathan Krinsky said Tuesday on CNBC's "Futures Now." The energy sector is currently in the midst of a 12-week losing streak, which by Krinsky's work is the worst in its plus-25-year history.
It's now been more than a year since crude oil began its vertigo-inducing plunge. Yet S&P 500 Index earnings continue to remind one of the classic joke that references the assassination of America's 16th president: "Other than that, how was the play, Mrs. Lincoln?"
Based on a mix between the reported earnings and the expectations for those results yet to released, S&P 500 companies are currently slated to report a 2.2 percent drop in earnings for the second quarter, according to FactSet. That would represent the first earnings decline since the third quarter of 2012.
Of course, that earnings growth number is likely to rise further as more companies unveil results—and could wind up in positive territory by the time all the earnings are out—given that companies tend to beat.
However, what's striking is how different that number looks once energy names are excluded. Thanks to a collapse in the price of oil, the energy sector is slated to report a monster 54 percent drop in earnings and 28 percent swoon in revenue, compared to the second quarter in the year prior.
Excluding energy, then, the S&P 500 would be looking at earnings growth of 4.1 percent. Meanwhile, revenue growth expectations would go from negative 4 percent to positive 1.8 percent, according to FactSet's senior earnings analyst, John Butters. The glum backdrop raises the stakes for the coming week, with oil giants like ExxonMobil and Chevron set to report quarterly results.
"The energy sector is reporting the largest year-over-year decline in earnings and revenues of all 10 sectors," Butters wrote in his weekly report.
"This sector is also the largest contributor to the year-over-year decline in both earnings and revenues for the S&P 500 as a whole," he added.
Of course, it can be all too easy for investors to do their best Johnny Mercer impression and simply "Ac-Cent-Tchu-ate the Positive"—twisting reality to suit a bullish investment thesis.
And investors who have exposure to the S&P 500 as a whole are indeed missing out on the higher underlying earnings they would have seen had oil prices had remained high.
That said, even with such a sharp decline in S&P 500 earnings, it shouldn't be interpreted as a direct sign the economy is slowing. After all, most Americans can be thought of as having a "short" rather than "long" exposure to oil prices, benefiting when oil prices fall in the form of lower gas prices.
While a decline in earnings would be disheartening, however, it might say more about one battered industry than about the strength of the U.S. economy.
Gold marked its 10th straight day of losses Wednesday, in the longest losing streak for the precious metal in almost 20 years. And some traders say the collapse isn't over, yet.
"Physical demand for gold in China is down 9 percent. Worldwide, demand for gold coins, gold bars down 17 percent this year. So you're not getting the buyers even though the price is going lower," said trader Anthony Grisanti on CNBC's "Futures Now."
From August to September 1996, gold fell 13 days in a row.
Gold watchers say one need only to look at the dollar to find the reason for gold's decline.
"Cash is king in the commodity world now," said RBC Capital Markets precious metal strategist George Gero, referring to the dollar. The dollar index is up 8 percent year-to-date. Since gold is priced in dollars, it tends to fall when the dollar rises. With inflation low and the dollar strong, Gero says gold will stay range-bound until there are signs of inflation.
"Higher U.S. interest rates continue to support an environment where 'gold yields nothing' for the investor," Gero wrote in an RBC report Wednesday.
But KKM Financial's Jeff Kilburg said the large selloff could prime the market for minor bounce-back.
"Sentiment changes so quickly. There's no rhyme or reason why the selling is so hard, but I think it will turn around," Kilburg said Wednesday. "I think it's time for a little bit of a relief rally."
The commodity fell as low as $1,080 on Wednesday, reaching new five-year lows. Gold is down 5 percent on the week and has lost 8 percent on the year. If gold were to finish the year at its current level, it would mark the first time it has posted three straight years of losses since 1996.
Gold recently tumbled to five-year lows. But according to one strategist, the precious metal isn't going to stay down for long.
"With all the bears in the woods, everybody [being] bearish is probably the most enticing reason to start to pick at the market," George Gero said Tuesday on CNBC's "Futures Now."
Gero, a precious metals strategist at RBC Capital Markets, said Monday's 2.2 percent selloff in gold was sparked by one large trade, rather than any sea change in the fundamentals.
"Somebody had to make the decision to be out of the market with that size trade, which distorted the markets," he said. "We will be going back in the next few months to basics."
Gero has a price target of $1,230 on gold by the end of the year, which he shares with survey participants from the International Precious Metals Institute. Along with the average price target, the 660 delegates sampled also on average saw a bottom of $1,080.
After a strong rebound over the past week, stocks look primed to make fresh all-time highs.
However, that's not necessarily an indication of bubbly inclinations.
In fact, despite what may be the public's perception to the contrary, market valuations have actually fallen from recent peaks. That means shares prices have gotten cheaper per each dollar of expected earnings.
As of Friday's close, the S&P 500's forward price-to-earnings ratio (a widely used measure of valuation that divides the S&P 500's price by the earnings that analysts expect companies to report over the coming year) sat at 16.8, according to FactSet. That's substantially below the recent peak for forward P/E logged in the beginning of March, which was then 17.3.
Fear is in a bear market.
The CBOE Volatility Index, or fear index as some traders call it, is trading at its lowest level since December 2014 and has fallen more than 39 percent in the past week, marking its second-largest decline ever. And while some investors may look at the low reading as a sign of complacency, one strategist contends it's creating an attractive buying opportunity.
"It's been a stunning decline in spot VIX over the past five days," Jim Strugger said Thursday on CNBC's "Futures Now." "This sets up well for stocks over the next several weeks into the fall."
According to Strugger, a low VIX read shouldn't come as a surprise to market participants. "The top five declines seen in the history of the VIX have occurred since January 2013, when the market moved into this low volatility environment," said MKM Partners' derivatives strategist.
And amid continued geopolitical uncertainty and jitters over a potential rate hike later this year, Strugger advised investors not to worry about stocks just yet.
"From a seasonal perspective, typically equity volatility bottoms right around here and tends to peaks in mid-October," he said. "So if you take into consideration the possibility for a rate hike in September/October and seasonal factors, it's unlikely we will see equity volatility until then."
Nonetheless, Strugger still believes volatility will remain relatively low for the next couple of years, which should bode well for the stock market.
"In volatility terms, we're only 2.5 years into this period of low volatility and historically, they tend to last five years," he said. "So you can certainly make the argument that there is another 2 or 2.5 years of low volatility environment which could correspond with an ongoing bull market."
In a heated debate on the Thursday, trader Scott Nations slammed the Euro Pacific Capital CEO for saying that Fed Chair Janet Yellen will not raise interest rates this year while simultaneously appearing to indicate that another round of quantitative easing could be in the cards.
"Peter, you do a great job of making these outlandish predictions and 1,000 of them come out of your mouth, 999 of them are wrong and then you live forever on one of them," said exasperated Scott Nations, on Thursday's "Futures Now." "It sounds like you are trying to do that now. What about now?" proclaimed Nations.
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