One trader thinks that history is suggesting that with volatility at historical lows, now is the time to get into the market. » Read More
Noted technician Louise Yamada sees a ‘speed bump.' Could this disrupt tech’s win streak? » Read More
There's one chart that has Dennis Gartman worried about the markets right now. » Read More
One technician sees a crude comeback in the charts. » Read More
The nearly decadelong bull market in the U.S. is long in the tooth, and there are better gains to be had elsewhere, according to one strategist.
"We have long thought the market has gotten ahead of itself, with U.S. valuations creating a headwind for continued market growth," Mark Eibel of Russell Investments said Tuesday on CNBC's "Futures Now."
The Dow, S&P 500 and Russell 2000 hit record highs this week as investors put the congressional testimony of former FBI Director James Comey and Attorney General Jeff Sessions on the back burner and await what could be the fourth rate hike in more than a decade on Wednesday.
But while U.S. equities continue to churn out gains, Eibel warned that a shaky political backdrop and anemic economic recovery could spark a selloff over the next several months.
"We do think we're due for a correction in U.S. stocks [and] a key risk is lack of policy follow-through," he said. "At some point the market will get tired of waiting for tax reform and other key policies from the Trump administration. There's a continued risk to the downside."
Additionally, Eibel pointed to second-quarter GDP as a potential catalyst to take U.S. markets down. "A lot of people are banking on it to make up for the first-quarter number, it needs to deliver ... I really think that that number might be the trigger point on does this market have the legs to go higher." First-quarter GDP came in at 1.2 percent, the weakest since the first quarter of 2016.
Rather than pile into the U.S., Eibel suggested investors "take chips off the table and place them around the world globally."
Specifically, he pointed to Europe and emerging markets. "Our biggest overweight in our international funds is in Europe, we know they're not as cheap as they were, but they're still cheaper than the U.S.," he said. Eibel added that European equities will remain more attractive than the U.S. as its economy continues to grow at the same rate as the U.S. and ECB President Mario Draghi maintains interest rates at zero.
"Europe is our biggest overweight in our international funds and a slight overweight to emerging markets in general. Just as oil is certainly not in the mid-20s anymore and developing markets are growing around 4½ percent, the dollar's not quite as strong. So, an overweight to emerging in general and Europe specifically," Eibel added.
If David Stockman is right, Wall Street should hunker down.
"This is one of the most dangerous market environments we've ever been in. It's the calm before a gigantic, horrendous storm that I don't think is too far down the road," he recently said on "Futures Now."
Stockman, who was director of the Office of Management and Budget under President Ronald Reagan, made his latest prediction after lawmakers grilled former FBI Director James Comey over whether President Donald Trump tried to influence the Russia investigation.
"This is a huge nothing-burger, but you don't take comfort from that. You get worried about that because the system is determined to unseat Donald Trump," said Stockman.
Stockman argues the latest drama on Capitol Hill is a distraction from the real problems facing the economy.
"If the Senate can involve itself in something this groundless, it's just more hysteria about Russia-gate for which there is no evidence. If they can bog themselves down in this, then we have a dysfunctional, ungovernable situation in Washington," he said, noting there are just seven weeks until lawmakers go home for the August recess.
Stockman contends it's unlikely tax reform and an infrastructure package will become reality in this environment — two business-friendly policies seen as a huge benefit to Wall Street.
In fact, he warns, the country could see a government shutdown in a matter of months.
A scenario like that could wipe out all of the stock market gains since the election and more, according to Stockman.
"I don't know what Wall Street is smoking. They ought to be getting out of the casino while it's still safe. Yet there's this idea that since he [Trump] wasn't incriminated, that proves that we can move on," he said. "I think it's crazy."
Stockman believes the S&P 500 could easily fall to 1,600, about a 34 percent drop from current levels. He's made similar calls like this in the past, but they haven't materialized.
"There is nothing rational about this market. It's just a machine-trading-driven bubble that's nearing some kind of all-time craziness, mania," he said.
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The market's reversal on Friday has one technician warning of a possible "wake up call" for bulls.
In an interview last week with CNBC's "Futures Now," T3 Live chief technical strategist Scott Redler presented one chart that suggested a move up to 2,470 for the S&P 500 Index before the end of June. According to Redler, the index had managed to stay above the 8-day moving average trendline even on shallow drops, which at the time led him to predict that more highs were ahead.
"Every time we hit the 8-day, which we did [on Wednesday at about 2,424 or 2,426], we've been holding that," explained Redler. "So until that trend changes, traders are trying to ride it so that way they can stay safe and profitable."
He added that if the index "can get above 2,440, which is the last pivot high, I do think that we can hit 2,470 by the end of the quarter," he added, as he sees the 8-day moving average line extending to around that level.
Yet once the tech sector was hit on Friday and dragged down the market, Redler changed his outlook on the markets. The S&P and Nasdaq Composite hit record highs on Friday morning, but the tech sector dropped almost 3 percent during the day, wiping out those gains.
According to Redler, while the S&P 500 did break above the 2,440 level that he had said was a key level to hold if the market were to move higher, the S&P's failure to maintain the level has led him to now be more cautious.
The main reason, Redler told CNBC on Friday, is that a loss of momentum — in this case in technology shares — can sometimes lead to a "reversal pattern" that could hint at a bigger drop.
Redler had also predicted on "Futures Now" that if the S&P were to drop to the 21-day moving average line in his original chart, which means the index would fall to around 2,411, that could be a potentially troubling level for the index.
The seemingly never-ending record run for stocks doesn't mean the Trump rally is on solid footing, according to perma bear Peter Schiff.
"I think the trade has unraveled a bit," the Euro Pacific Capital CEO said last week on CNBC's "Futures Now."
Last week, stocks set new all-time highs, as investors shrugged off a weaker-than-expected May jobs report and remained at least partly motivated by elements of President Donald Trump's policy agenda. However, one of Wall Street's most relentlessly bearish voices was unimpressed.
"Remember that early in the Trump trade, you had a strong dollar. The dollar has surrendered 100 percent of its gains post-Trump's election," Schiff told CNBC. Additionally, "year to date the S&P is up, [but when] priced in gold the S&P is actually down."
So instead of staying in the U.S. stock market, Schiff is urging investors to buy bullion, which "is up more than the Dow and more than the S&P," with the yellow metal having rallied 11 percent this year. Gold rose to its highest price since the end of April on Friday, thanks largely to the continued drop in the U.S. dollar.
Meanwhile, Schiff said it's also time to look overseas, as foreign markets are actually outperforming the U.S.
"The U.S. markets have been pretty steady while foreign markets have been much stronger, [with emerging markets also being very strong," he said. "I expect this trend to continue and I think it will accelerate in the second half of the year."
In fact, while the S&P 500 Index is up almost 9 percent this year, Wall Street analysts have started urging investors to look at Europe, also up 9 percent year to date. Emerging markets, however, have soared over 19 percent so far in 2017.
But Schiff says more trouble could be ahead for the markets, especially given the Federal Reserve's next actions. While the CME Fedwatch Tool is predicting an over 90 percent chance that the Fed will hike rates during its meeting next week, Schiff doesn't expect any more hikes after June, which could damage the market.
"Even though the Fed claims to be data-dependent and they hike interest rates [in spite of weaker than anticipated data], I think the markets are starting to look beyond the hikes to the cuts," said Schiff. "I think we're getting ready to start a new easing cycle."
Schiff had previously cast doubt on the number of rate hikes. In February, the ardent Trump critic had pointed out that economic data was weaker than anticipated, blaming the Fed for Trump's election.
The long correlation between the U.S. dollar and oil has been fading over the years, and that could temper the prospect of another big rally for crude, according to veteran technician Louise Yamada.
The managing director of Louise Yamada Technical Research Advisors compared a long-term chart of the U.S. dollar to a chart of crude and the Commodity Channel Index, which is usually used to identify cyclical turns in commodities.
"The correlation between oil and the dollar hasn't been all that great," Yamada said Tuesday on CNBC's "Futures Now." "You had a four-year top in 2011 to 2014 [in crude], and the dollar rose in 2014 and then went sideways."
"Now the dollar's coming down, and energy and the commodity index aren't doing anything at all," she added. "So I'm not sure that the correlation is necessarily in sync at this point in time."
Previously when the dollar fell, crude would rise as each barrel would be worth more in dollar terms. But the absence of higher prices for crude despite a falling dollar leaves Yamada believing that the commodity will likely be stuck in a range, even if it doesn't tumble substantially.
According to Yamada, this range is likely to be $45 to $55, meaning that "[there isn't] a compelling directional indication at this point" that would suggest a big move for crude.
Crude continued its losing streak on Wednesday, falling by more than 3 percent on news that Libya was raising production at a time when oil oversupply is still a concern for OPEC.
Bill Stone believes that while investors are focused on what awaits President Donald Trump now that he's returned to Washington, the market rally will still continue, thanks to strong fundamentals that he expects will carry through the year.
In another week in which the S&P 500 Index hit new all-time highs, PNC Asset Management's global chief investment strategist laid out the factors that he expects can send the market even higher. On Friday, markets slipped slightly after seeing one straight week of gains.
"We'll still likely see good [earnings] growth rates for the rest of the year," he said Thursday on CNBC's "Futures Now." In addition, the U.S. economy "is probably going to be picking up here."
First quarter economic growth "was very weak, but we think you're going to end up with 2.4 percent growth rate GDP in the U.S.," he added.
And thanks to the positive economic outlook coming out of the U.S., Stone also thinks that part of the reason why stocks will keep rallying is the Federal Reserve. As a result of expected rate hikes, the market has already priced in tighter monetary policy for this year, which should mean higher returns for investors.
Last week's Fed policy setting minutes essentially cemented the probability of a rate hike in Jun. Stone told CNBC it's not out of the question that the Fed could raise again in December.
But until then, Stone says that it's safe for investors to keep getting into stocks. He mentioned that he sees the tech sector "broadening out" for even more upside in the future, implying that more record highs could be ahead, thanks to big-cap tech.
Crude oil is up nearly 20 percent from its 2017 low earlier this month, but the rally could come to a halt when OPEC meets later this week, according to one well-known energy voice.
The group of oil-producing countries is expected to extend a production cut deal between them and 11 non-OPEC member countries at a meeting on Thursday in Vienna, but RBC Capital Markets' Helima Croft believes that isn't enough to resolve oil's oversupply problems.
"Once we had the Russia and Saudi announcement a week ago, the expectation is that we will get a nine-month extension as opposed to a six-month extension," Croft said Tuesday on CNBC's "Futures Now." "But because that's already priced in, I think the question is are they going to go deeper?"
"I'm a little bit concerned if we just get a nine-month extension without a deeper cut it would kind of be a nonevent for the market," said Croft, RBC's head of commodity strategy.
In other words, Croft believes that the 6 percent rally in crude over the past week has already baked in the prospect of a deal extension.
Instead, the OPEC countries will need to agree to deeper production cuts. "The argument is that you need to go beyond Q1 of 2018 to get inventories below the five-year average," she said. "That was the sort of surprise announcement that came out a week ago, but that puts a lot of pressure on this meeting."
But even without deeper production cuts, Croft believes that oil can still "grind higher" to finish in the low $60s at the end of the year.
They say the only thing to fear is fear itself, and that's exactly what happened in the markets this week, according to one strategist.
With President Donald Trump reeling amid a series of political setbacks, investors have become wary. In a recent interview with CNBC's "Futures Now," Oppenheimer's John Stoltzfus said the "ghost of impeachment" got the best of the markets last week — and subsequently sent the Dow tumbling nearly 400 points in spite of strong fundamentals and earnings.
"That's the big worry behind everything," he said last week. "People jump to conclusions and when we looked at the market [on Wednesday] and we looked at comments that were coming across the board related to that, there was a lot of the ghost of impeachment kind of thing."
The strategist's comments came just a day after the market saw its biggest selloff of the year, with the S&P 500 and Dow seeing their biggest drop since September while the Nasdaq had its worst day since Brexit in June.
A week of political turmoil, one that included fallout from the firing of former FBI director James Comey and the president's alleged revelation of classified intelligence information to Russia's foreign minister, had left investors wary of the outlook ahead.
"It doesn't mean that that's necessarily going to happen, but negative projection is an enemy of the market at times like this," explained Stoltzfus.
The markets regained all of the day's losses by Friday, leading Stoltzfus to emphasize the strong fundamentals that he says will ultimately drive stocks higher.
"The market ultimately goes with the economy," he explained. "You've got a global economic recovery that becomes less deniable on a quarterly basis, if not on a weekly and monthly basis, and then in the U.S. the economy looks sustainable."
Stoltzfus actually made the case that the economic outlook is so strong, in fact, that the so-called Trump rally was actually "really more of the market recognizing that it could move higher based on fundamentals."
In other words, the President's policy proposals, including his highly-anticipated tax reforms, were actually adding on to what was already a strong set of market fundamentals, and not the main cause of the rally.
The strategist sees the S&P 500 Index climbing up to 2,450, almost 3 percent from Friday's trading levels.
The godfather of technical analysis says one classic theory is predicting a sell-off before another market rally will take place.
"Dow theory" is a name given to the simple idea that the Dow Jones Transportation Average ought to "confirm" the strength seen in the Dow Jones Industrial Average. If the Dow components rise to a new high while the Dow transports stagnate, a market dip could be ahead, the theory goes.
On Friday, all three major market indexes fell for a second day in a row. Currently, the transports index is trading well below its March 1st high, while the industrials are close to record levels.
This divergence signals that "on a short-term basis, it's a pause [ahead]," said Ralph Acampora, director of technical research at Altaira Capital Partners.
There have also been divergences within the major indices.
"The leadership [in the market] got fractured in the last few months," Acampora said on CNBC's "Futures Now." last week. "We got tech at new highs, and you've got telecom making new lows and the financials are flat."
The market expert also states that should the Dow Theory prove true, "You could have a little bear market [where stocks drop] 15 to 20 percent."
At the same time, Acampora says that "it's not the end of the world" and that he remains "a secular bull." According to Acampora, he would stay long the market as long as the Dow "stays above 20,404" and the transports "stay above 8,874," which he identifies as key closing levels for both indexes.
In fact, Acampora believes that should a sell-off of that magnitude occur, it would be "one heck of a buying opportunity" for investors.
Market watcher Sven Henrich, known widely as the "Northman Trader," returned to CNBC's "Futures Now" on Tuesday with two more charts that he says point to the "final wave" of the bull market.
Henrich has been calling for the end of the bull market for months, but now says that recent market trends convince him that a pullback is truly on the way.
The first of the indicators, according to the Northman Trader, is the number of "gaps" in the chart of the Nasdaq 100-tracking ETF (QQQ). In this case, "gaps" refer to a sharp move up in a price chart, often a sign of a stock being traded during premarket or after hours, and Henrich believes that their abundance even just this year points to trouble.
"It's not unusual for a gap or two not to get filled, but in this particular case, we've seen one gap after another not getting filled," said Henrich. "In fact, we've got 17 gaps now [dating back to 2016, including leading up to] the French election a couple weeks back, for example, and that basically implies that a lot of this price action has not been traded during market hours."
On top of that, the Nasdaq's new highs have been driven by a handful of big-cap stocks, mostly in the tech space. While stocks like Apple, Amazon and Facebook keep hitting new peaks, Henrich makes the point that "the fact that these big-cap market stocks keep driving higher is basically masking any weakness underneath" and aren't necessarily representative of the market's big picture.
Henrich's second source of worry lies with the fact that fewer and fewer stocks are participating in the rally. According to Henrich, the ratio between the S&P 500 equal-weighted ETF (RSP) and the S&P 500-tracking (SPY) has flattened while the SPY rises, which he takes as a sign that fewer stocks are driving the rally.
That said, the RSP has closely tracked the SPY over the past year, so the average stock in the S&P 500 is performing just as well as the overall index.
"From our perspective, as we move higher in price, it provides an opportunity to sell this market, especially with volatility being so low," said Henrich.
He believes that the S&P 500 could still run up to 2,500, but the technical levels suggested by the charts are signaling a pullback if that level is ever reached.
To be sure, this is not Henrich's first time making a bearish case. A year ago, he forecast that the S&P 500, then near 2,050, would fall to 1,573 in a matter of months. Instead, the index fell no lower than 1,992 before finishing the year at 2,239.
On Wednesday, the S&P 500 and the Nasdaq were both down from their record highs.
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