Economic theory can help make sense of the massive slide in stocks we've just suffered.» Read More
Coffee futures may have gotten roasted over the past two years, but don't expect to pay less for your morning latte. Instead, the drop is seen as a boon for coffee sellers like Starbucks and Green Mountain.
Since hitting a high in May 2011, coffee futures have lost almost two-thirds of their value. In fact, the futures recently hit a four-year low of $1.15 a pound.
Largely to blame has been Brazil. The world's biggest coffee producer and exporter, Brazil produced a record crop in 2012. While the harvest is expected to be slightly down this year, it is still expected to be very large, and another record is expected in 2014.
If there's one company that's been helped by the price decline, it's been Green Mountain Coffee.
The slide in coffee prices has had an "enormous impact" on Green Mountain, said Jonathan Feeney, who covers the company for Janney Capital Markets. "You've seen nothing but top-line misses and enormous beat on the bottom line," because of the increased profits from lower coffee costs.
(Read more: Green Mountain earnings beat, revenue falls short)
And according to research released by Feeney on Monday, Green Mountain's commodity costs are down by 11.3 percent in September, compared with the year prior. "That alone would be inflationary to gross margins by 250 basis points," he said. In other words, Feeney expects the decline he's measuring for the month of September to add 2.5 percent to the company's profits.
After all, Green Mountain is in a "commodity-oriented business," Feeney explains. "It's a product that you just roast and put in a can."
How many more clowns can fit into the car?
The Nasdaq 100 printed another 13-year high on Monday morning, as we continue to see investors get into the outperforming index. But just like a clown car at the circus, it is amazing how many people can be squeezed into one vehicle.
(Read more: Trading will get crazy! 3 ways to stay sane: Pro)
In August, the Nasdaq outperformed again, as the Nasdaq futures drove near the flat line while the Dow Jones swerved by more than 4 percent. Nasdaq traders now wait in anticipation of the Apple announcement on Tuesday.
After all, Apple is the heavyweight of the Nasdaq index, and with the stock doing flips around the $500 level, hopefully the event will provide some clarity.
With a gigantic event for gold coming next week, we expect to see the metal stay in a range over the next few days. But if gold somehow falls below $1,352, it could mean big trouble for it..
Gold used a disappointing employment report on Friday to trade $25 from its low on Friday morning, and to reach a high of $1,393.60—just shy of resistance at $1,395.20. Meanwhile, on the downside, Friday's low of $1358.20 kept gold away from the $1,352 make-or-break line in the sand.
(Read more: Why bad news for workers is great news for gold)
As we head into this week, the major focus is the FOMC meeting that begins a week from Tuesday. After all, it is the announcement from this meeting (which we will get on Wednesday, Sept. 18) that will finally give us some clarity on when the Federal Reserve will begin to taper its easing program, and by how much.
Ahead of this event, we are looking for the market to stay range-bound into next week, and we will continue to trade the levels.
(Read more: Top technician is sure that gold's going to $1,200)
As soon as the jobs number came out on Friday morning, gold immediately shot $20 higher. This is a clear reflection of the number's weakness.
Nonfarm payrolls data showed that 169,000 jobs were added in August, compared with estimates of 180,000 jobs. And at this point in the recovery, 169,000 jobs is simply not good enough.
And while the unemployment rate dropped to 7.3 percent, that was because fewer people were looking for jobs. Incredibly, the labor force participation rate dropped to 63.2 percent, which is the lowest it's been since 1978.
(Read more: Gold has become a 'Humpty Dumpty' trade)
While I don't think this weak number takes a Federal Reserve tapering of quantitative easing off the table, it could certainly lead the Fed to taper at a slower rate.
Again, after five years of stimulus, these numbers are simply not where they should be. So why would the Fed scurry for the exit now, instead of tapering down its bond-buying program at a more manageable rate?
Forget Friday's bond rally off of the weaker-than-expected jobs report. Because while the 10-year yield dropped below 2.9 percent on Friday, Brent Schutte, market strategist at BMO Private Bank, says we've hardly seen the start of the rate rise. That would mean that bond prices, which move inversely to rates, have much further to fall.
"For all the talk of a cult of equities, I think there's a cult of bonds," Schutte said on Thursday's "Futures Now." "We had this great 30-year bond bull market that made people think there was no reason not to buy bonds, and that things were going to be OK."
But in Schutte's view, "4 percent (on 10-year Treasurys) somewhere around the end of the year to early next year would be a good intermediate-term level. And if you look over the longer term, I don't think that 6 or 7 percent is out of the question."
Schutte presented three reasons why a 7 percent yield wouldn't surprise him.
Think you had a tough week? Don't go complaining to gold. The yellow metal has declined by almost 5 percent since last Wednesday's high—and RBC's top technician thinks it's about to get even worse.
"We're sticking on the bearish side for gold prices," said George Davis on Thursday's "Futures Now."
Davis, the chief technical analyst at RBC Capital Markets, thinks little of gold's 22 percent rally from the June low. "You are seeing a little bit of a corrective rally, and I think a lot of that has been driven by geopolitical risks emanating out of Syria," Davis said. "But we do think that those are going to be transitory, so the very short-term risks are going to pass."
(Read more: Gold has become a 'Humpty Dumpty' trade)
That's why Davis says it's high time to get short. "Valuations are starting to become more overbought at this juncture," he said. "I think there's a window of opportunity where you could leg into some short positions."
So what does he see on the chart that points toward lower prices?
With Friday's all-important job number looming, stocks are likely to stay in a tight range. But bulls and bears alike still have the opportunity to make money.
Equities traded with bullish momentum early Wednesday, as they prepared themselves for the gauntlet of data. Momentum late in trading was supported by the Federal Reserve's Beige Book, which showed a "moderate to modest" expansion in spending.
After holding major support at the line in the sand on Tuesday—the 1,629.25 to 1,631.25 level—the S&P closed above the 1,645 to 1,647.50 pocket. And on Wednesday, the S&P finished above the crucial 1,650 level.
Gold sentiment has certainly turned around in recent weeks. The market had been very bearish, but that was before gold rose more than 20 percent from its lows—a development that had bulls chirping that gold's "bull market" is back.
But as we see gold futures oscillate around $1,400, gold now resembles Humpty Dumpty—and it is imperative that it lands on the right side of this psychological "wall" in order to maintain momentum.
The Syrian situation should prove supportive of gold, but only because the idea that gold is a safe haven has regained traction among investors.
Gold bulls shouldn't get too confident, because gold could lose that "flight to quality" feeling again.
(Read more: Gold will face a rocky week; here's why)
What would it be like to get one of the market's most famous contrarians on the therapist's couch? Viewers found out on Tuesday's "Futures Now," when host Jackie DeAngelis played the classic word association game with Dr. Doom himself, Marc Faber.
The game itself is simple. When presented with a word, the participant responds with the first word that comes to his head. It's thought to provide insight into the subconscious associations that people make, but it can also be a great deal of fun.
(Read more: Here's what Marc Faber likes more than gold)
Here, then, are the terms Marc Faber was provided with—and his responses.
If you want to hear a rosy view on the market, you'd better not listen to Marc Faber.
The editor and publisher of the Gloom, Boom & Doom Report has long held that a correction was coming—and even though that thesis has not exactly played out this year, he's standing by it.
"In my view, we'll go back to the lows in November 2012—around 1,343" in the S&P 500, Faber said. Overall, he considers U.S. equities a "better sell than a buy."
On Tuesday's "Futures Now," he provided three three main reasons for his bearish view.
Reason one: The U.S. will follow emerging markets down
It hasn't been an easy summer for emerging markets. In the period of a month and a half, the iShares MSCI Emerging Markets ETF (which tracks emerging markets' large- and mid-cap stocks) lost nearly 20 percent of its value and has hardly bounced back from the lows.
That has made the U.S. market an outperformer, but Faber believes it cannot last. In fact, he said, U.S. equities could be hurt by their relative costliness.
"When emerging markets go down and the S&P goes up, the asset allocators say, 'Do I want to buy the S&P near a high, or do I venture back into emerging economies that are down 50 percent from their highs, like India or Brazil and so forth?' So you understand that the pool of money can flow back into emerging markets," Faber said.
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