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Now that gold's Fed pop has subsided, look for market to retest recent lows.
Everyone will remember last week as the one in which the Federal Reserve failed to taper asset purchases. Gold shot up as a result. So you might be surprised to learn that from the electronic open on Sept. 15 to the electronic close on Friday, gold actually traded lower on the week.
(Read more: Gold bulls undeterred as stimulus-led rally fades)
In a way, this is exactly as it should be. Because on first blush, the Fed's decision not begin its exit from quantitative easing appears bullish for gold. But the reality is that this does not change the scope nine, 12, or 18 months out, when the chances of hawkish Fed action still appear highly likely. And that's what you see reflected in the gold market now.
(Read more: Why Bernanke may have ended gold's bear market)
Gold initially rallied after the Fed announcement on Wednesday, and extended its highs into Thursday, when it reached $1,375.40 in the December futures. With major resistance above at $1,379 and $1,383 to $1,384.10, gold never even had the strength to reach major resistance levels. And once gold moved below the key $1,352 level on Friday, the party was over. We believe that much of the initial reaction to the Fed was short-covering and stops getting hit at the $1,325 level, rather than fresh buying.
Gold has had great week. So is this the start of a sustained move higher, or just simple short-covering? You'll have to watch Friday's close to find out.
Gold traded to a low of $1,352.10 on Thursday night after stalling out and failing to make new session highs against $1,375.40 in Thursday's session. The level just below there, $1,374.30, has served as resistance a few times over, and now there is a major trend line meeting the market at that level.
This adds to the headwinds, and helps explain why the market kept stalling out around $1,375 on Thursday.
But it wasn't for lack of trying—gold twice made a run at the highs. Gold reached $1,375.30 the first time, and the second attempt was right ahead of the floor close. When the market caught resistance at the same level, it began to show signs of failure, sending gold into the mid-$1,360s.
(Read more: Gold recovery? Here's one way to play it)
Gold was able to hold support at $1,362.80 on Thursday and Thursday night. But on Friday morning, it chewed through that level, and ran stops below Thursday's low of $1,358.50.
Gina Martin Adams is sticking to her guns.
The Wells Fargo strategist has been bearish on stocks all year, even as she watched the S&P 500 add 21 percent. And on Thursday's "Futures Now," Adams reiterated her call that the index would close out the year at 1,440.
"Our target is based on fundamentals," Adams insisted. "We're basing our target on typical valuation measures, given the level of interest rates and also on earnings forecasts. And that's why our target is relatively low."
In fact, "low" is somewhat of an understatement. Adams' target implies that the market will drop 16 percent in little more than three months, erasing everything that stocks gained after the year's first day of trading. This makes her one of the lone bears on the Street.
So what could produce such a dismal fourth quarter for stocks?
First of all, Adams is highly skeptical about the rally that the market has enjoyed thus far.
"It's all about emotion at this point. The entirety of the S&P 500's increase this year has come via the multiple," Adams said. "It's been simply through the amount that investors are willing to bid up the value of the future earnings stream."
Indeed, the S&P 500's price-earnings multiple has risen from 17 on Jan. 1 to nearly 20. That means the market has largely been rising due to investors' willingness to pay more for those earnings.
(Read more: Robert Shiller to bulls: 'Don't expect miracles')
When Ben Bernanke announced that the Federal Reserve would not reduce the pace of its $85 billion-per-month quantitative easing program, gold greeted the news with open arms. The yellow metal promptly added more than $50 after Wednesday's news to hit the highest level in a week.
But Peter Boockvar says we've only seen the beginning of gold's response to the news.
"The two-year bear market for gold is over, and the uptrend is going to resume," said Boockvar, chief market analyst at the Lindsey Group.
(Read more: Will gold make a run for $1,500?)
"Gold is your defense against your policies of the Fed, and in my eyes, the Fed lost a lot of credibility today," Boockvar told CNBC.com. "Just when you thought the Fed was very dovish, they pull an even more dovish act, and many in the markets were blindsided."
For Boockvar, gold's post-announcement move was "predicated on the idea that the Fed is going to repeat the mistakes of the mid-2000s, and way-overstay its welcome with QE." He owns gold, because he thinks that thesis will end up playing out.
As we anxiously await the Fed's imminent decision, the bond market fluctuates, and the 10-year note is yielding 2.89 percent (Rick Santelli's line in the sand).
Sunday's bombshell announcement that Larry Summers was no longer seeking the Federal Reserve chairmanship candidacy launched investors back into Treasurys. On Monday, we experienced one of the most precipitous drops in Treasury yields thus far in 2013, as the market believes that the QE program will not be wrapped up as quickly without Summers at the helm.
This move—which was nicknamed the "Summers slam" in the bond pits in Chicago—certainly caught some shorts in the bond market.
Janet Yellen, the vice chairwoman of the Fed Board of Governors, is now the most likely nominee. And when Ben Bernanke steps down, a Yellen appointment will probably make for a much smoother passing of the baton.
So counterintuitively, Bernanke is now in the position to taper a bit more rather than less, because the QE program will probably be around a bit longer under Yellen's leadership, compared with under Summers'.
(Read more: Whatever the Fed does, gold will rally: Schiff)
Get excited, because one of the most highly anticipated events for the market is finally here. On Wednesday, the Federal Reserve will finally answer the question that has long consumed the thoughts of investors worldwide: Will the Fed announce a tapering of its quantitative easing program in September?
Whether it announces a large taper, a small taper or no taper at all, the Fed's decision will have a tremendous impact on how the S&P 500 trades (and the S&P e-mini futures alongside it). So, keeping in mind that most analysts and traders believe that a taper in the range of $5 billion to $15 billion is priced in, let's analyze how the market will respond to four possible scenarios.
(Read more: Whatever the Fed does, gold will rally: Schiff)
A slightly bigger taper, in the ballpark of $15 billion to $20 billion, would cause a short-term correction. In this case, the S&P September e-mini futures would likely fall to major support at 1,681.
All eyes are the Federal Reserve's policy announcement. But while it's expected to be one of the year's most important events for stocks and bonds, Peter Schiff believes he has already figured out the likely impact on gold. Because according the CEO of Euro Pacific Capital, whatever the Fed announces will end up being bullish for the precious metal.
Many expect the Fed to announce that they will begin to reduce, or taper, the pace of its massive bond buying program. According to the latest CNBC Fed Survey, market participants see the a taper of about $15 billion coming, and a plurality believes that it will be announced this month.
Peter Schiff believes that a smaller taper is coming. But he says that no matter what the Fed announces, gold will end up rising.
On CNBC's "Futures Now" on the eve of the Fed's expected announcement, Schiff outlined three scenarios, and went on to explain why each would end up being good for gold.
Scenario 1: No taper
"If it's no taper at all, I think gold will rally," Schiff said.
This makes a great deal of intuitive sense, as tapering concerns have certainly appeared to weigh on the gold market in the back half of the year. After all, Fed bond-buying has depressed interest rates, making noninterest-bearing assets like gold look more attractive. And because the Fed simply "prints" the money used to buy those bonds, some believe quantitative easing will end up creating inflation, which would be a boon for gold.
That said, Schiff does not see a Fed announcement of no tapering as a likely scenario.
(Read more: The best Fed taper scenario possible?)
Are Apple shares cheap? Now that they've fallen over 10 percent on the back of Apple's recent product launch, it seems to be a fair question. But even though Apple now has a lower price-to-earnings ratio than do slow-growth companies like Microsoft, Intel, or IBM, Doug Kass says the stock still doesn't present an attractive value.
"Apple has become a value trap," the founder of Seabreeze Partners Management said. "This is a company with no growth, and profit margins that are way too high vis a vis the competition."
Indeed, at its latest media event, Apple disappointed many investors but not releasing a much cheaper iPhone, as some had been pining for. Instead, Apple released more high-end phones that will keep profit margins high, but threaten to do further damage to the company's already-declining market share.
(Read more: At a crossroads, Apple must make one huge decision)
"We remain disappointed with Apple's decision to remain a premium priced smartphone vendor," Credit Suisse analyst Kulbinder Garcha wrote in a note that downgraded the stock to "neutral" from "outperform" after the event. "On our new estimates, Apple's smartphone share will decline to 15.5 percent/13.1 percent this year and next from 18.1 percent last year."
But Kass says that there's a second issue at work: While Apple's prices have stayed high, the company has not delivered innovation to keep pace.
The S&P 500's revenue growth for the fourth quarter is expected to be 1.0 percent, the research company FactSet reports. That might not sound terrible, but if not for a weird quirk in one company's accounting, the expected revenue growth would be more than double that.
The culprit is Prudential. In the fourth quarter of 2012, the insurance giant reported revenue of $46.1 billion, which was almost five times what the insurance giant reported in the fourth quarter of 2011, and amounted to more than half of the company's total revenue for the year.
The revenue surge was due to two "pension risk transfer" transactions, one associated with General Motors and one associated with Verizon. This led to a major increase in revenue in the fourth quarter, but also led to a big boost in "insurance and annuity benefits." Since the benefits were expensed against the increase in revenue, earnings were not impacted like the revenue number was.
But because of the one-time boost, Prudential's revenue in the fourth quarter amounted to a massive 1.7 percent of the entire Q4 revenue for the S&P 500, according to S&P's Howard Silverblatt.
Prudential, then, is expected to show a massive (and misleading) decline in year-over-year revenue in Q4 2013. And that, in turn is dragging down the revenue growth expectation for the entire index. So while the estimated revenue growth rate is 1.0 percent, "if Prudential is excluded, the revenue growth rate improves to 2.2 percent," according to FactSet.
(Read more: Where did earnings go? Profit outlook gets gloomy)
As the Larry Summers news boosts the gold market, December gold futures should be well supported above $1,308.30.
With news that Summers withdrew his name from consideration to replace Ben Bernanke as Fed chairman, gold opened higher Sunday night. This continued the bullish momentum we saw into the electronic close on Friday.
On Sunday, gold traded up more than $25 from its Friday floor close, reaching a high of $1,336. This may look like a monstrous open, since gold closed the floor session on Friday at $1,308.60, but in reality, the electronic session went off just below $1,330, and gold traded less than $10 higher on Sunday night.
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