One top RBC strategist says OPEC will have to dig deeper to solve crude oil's oversupply problems. » Read More
One strategist says the markets will grind higher this year, but only if the biggest "enemy" to the market doesn't materialize. » Read More
Ralph Acampora, also known as the godfather of technical analysis, says a pause in the rally is coming. » Read More
The Northman Trader Sven Henrich is back, and he's got two charts that show a pullback could be coming for the market. » Read More
History shows the only place for interest rates to go from here is higher — according to veteran technical analyst Louise Yamada.
Looking at a chart of U.S. interest rates over the last two centuries, Yamada pointed to a bottoming formation that has been in place for the last several years.
"We've been looking at the process that we think has been taking place over the last six to eight years in our interest rates, and we think now that the 2012 low probably is going to prove to be the low just the way 1946 proved to be the low in the last cycle," the head of Louise Yamada Technical Research Advisors said Thursday on CNBC's "Futures Now."
"I think it would be very healthy [to raise rates]," explained Yamada. "We are definitely watching 3 percent because that's going to be the ultimate level at which we can definitively say that rates have reversed." That 3 percent also corresponds with the 1980 downtrend on Yamada's chart.
"We are looking at the formation of the higher low, and the 10-year note would have to put in place a slightly higher high to define the real technical evidence of the reversal," she added.
Ultimately, Yamada said that higher rates will boost equity prices in the near term, as past cycles have signaled a boom in stocks and the economy.
"The early stage of a bull market can be accompanied by the initial rising rate cycle," she said. "It isn't until you get to about 5 percent that you start having problems."
The S&P 500 closed Thursday within a fraction of its all-time high.
In the aftermath of a harrowing election cycle, JPMorgan is urging investors to avoid making moves based on emotion and politics as the so-called Trump rally takes a breather.
"We are seeing a bit of a pause. There was a very sharp reaction after the election," JPMorgan's Stephen Parker said Tuesday on CNBC's "Futures Now." "What you're generally seeing is a rotation from the playbook of the last couple of years that was all about a low-yield, low-inflation monetary policy driven world to a world where you're looking at higher rates and higher inflation."
The head of thematic equity solutions for JPMorgan Private Bank went on explain that with these developments in mind, investors should look to pro-cyclical parts of the market like banks and health care. And, while gains for those sectors have taken a pause in recent sessions, Parker maintains that outlook is still positive. Thanks to strong earnings potential and subsiding fears that these sectors will be heavily regulated under President-elect Donald Trump, Parker says it's now time for Wall Street to focus on the big picture.
"In times like this, where politics and macro uncertainty have driven major market swings, the most important thing for clients to remember is to stick to a long-term plan," Parker said in a note to CNBC. "Emotional investing at a time like this can be very detrimental to returns."
Parker noted that, on the Monday after Brexit, there was nearly $10 billion in outflows from global equity funds, one of the largest redemptions in the last decade. And, since then, stocks are up nearly 10 percent.
With this in mind, Parked urged investors to capitalize through buying the dips.
"Long-term investors could be getting a good opportunity to add on weakness," Parker concluded when discussing a strategy for the next 12 to 18 months. "While dollar strength could be a headwind, emerging market central banks and economies are much better positioned to deal with what we believe will be a modestly stronger dollar, thanks to prudent policy action and the recovery in commodity markets."
Given this, Parker believes that, if interest rates move higher because of improving growth and global reflation, that emerging markets should be well positioned to benefit. He noted that emerging market valuations have underperformed U.S. equities by over 100 percent from 2010 to 2015 and therefore look attractive with better growth prospects that could serve as the catalyst to reverse recent trends.
There's a key technical level which could disrupt the market rally sparked by Donald Trump's win, according to a widely followed market watcher.
"If you look at the long-term chart of the S&P [500 Index] futures, this week we actually saw a test of the long-term support trend line back to 2009. That only happened after-hours and in overnight action,"said NorthmanTrader founder Sven Henrich recently on CNBC's "Futures Now."
However, he added "that confirms this trend line. It's a very steep trend line. It's an important trend line."
Henrich estimated there's 100 percent chance that this line will be breached — it's just a matter of time.
"We just tested this trend line this week, hence the bounce made sense. Should we break below this week's lows then markets will get severely tested," said Henrich,
Henrich argues investors are seeing 'quite the panic sector rotation' right now. And, it's been helping to drive the Dow to all-time highs. He's also forecasting volatility levels are bound to increase significantly going into next year.
"While we see this massive rally in the last week, we need to be keeping in mind that on the short-term chart, we actually have broken the February trend line that would support from February into Brexit," said Henrich.
"We broke it in September and now we are re-testing it from the underside. Until we break above that, this rally is still very suspect," he added.
There's another element to the market which concerns him. Henrich predicts FANG stocks, otherwise known as Facebook, Amazon, Netflix and the former-Google, are positioned to see a lot of trouble because they are too stretched.
His observation comes amid growing speculation that President-elect Trump's policies could hurt technology companies.
"If you look at the Nasdaq 100 Index which made new all-time highs this summer, it was really just a few stocks that have been driving this," said Henrich.
"Ten stocks in the Nasdaq 100 comprise of 50 percent of the market cap, and these stocks are now selling off here... Since they are very high weighted in cap, that could cause some damage on the indices."
As investors wait with bated breath to find out who the 45th U.S. president will be, Wells Fargo delivered a calming message: Equities are heading higher with either Hillary Clinton or Donald Trump in the White House.
"We've been telling our clients for a year: The trajectory of the economy will remain the same during the next 12 to 18 months of the new president's term no matter who is elected," Scott Wren explained to CNBC's "Futures Now" on Election Day. "The market might worry or think about what might happen two or three years down the road based on who is president, but only for a very short time. The market will quickly get back to trading on what the economy and earnings are going to look like over the next six to 12 months."
On a case-by-case basis, the senior global equity strategist for Wells Fargo Investment Institute said that, with a Trump victory, there would likely be some short-term market downside, but that it would not be comparable to the severe drop that followed Brexit.
If there's one thing most traders could agree on before the election results came in, it's that Nov. 9 was going to be a busy day for the markets.
That goes doubly for day traders, who buy and sell stocks on small movements in the market and expect an especially wild few hours.
"It's going to be a day of extremes," said Jake Bernstein, author of "The Ultimate Day Trader," on Tuesday.
Based on what Bernstein had seen over the last couple of days — the S&P 500 has shot up 2.6 percent since Monday's opening, after falling a cumulative 3 percent over nine days — he expected Wednesday to be extremely busy. The market has had its best two-day stretch since Brexit, after its worst consecutive-days negative stretch since 1980.
And that volatility came as many professional fund mangers predicted along with everyone else a Clinton win. The Clinton wins-stocks rise scenario is history — history not made. So it's on to the fear that equities could tank with Trump being declared the victor. But intraday trading may be more complicated.
Call it a crude show down for the ages.
Two of the most respected commodities experts on Wall Street duked it out recently over oil's next stop, and whether OPEC would be a catalyst for driving prices higher or lower.
In one corner, "Commodities King" Dennis Gartman maintained that OPEC cheats and that the word of the cartel should not be trusted.
In the other corner, Helima Croft of RBC Capital Markets reiterated that the Organization of the Petroleum Exporting Countries will strike a deal, which will ultimately drive the price of crude higher.
"It's going to be very difficult to get WTI much below $40," Gartman told "Futures Now" last week.
However, while he noted that a panic liquidation could driver prices towards $38, Gartman maintained that $52 oil would be a difficult target to achieve given the current climate. "We may well be stuck within a broad range. Call it $38 on the low side and $52 on the high side."
Following a segment on CNBC on Tuesday, Gartman again cast his doubts over OPEC's rhetoric and emphasized that the cartel, "cheats no matter what happens. They have no choice. And I think that cheating, which has been endemic to OPEC since its inception, will simply continue."
Croft, who has been bullish on oil throughout the course of 2016, took issue with Gartman's assessment of OPEC's practices.
"We remain convinced that OPEC will stick this landing," explained RBC's Global Head of Commodity Strategy, ahead of the upcoming OPEC meeting on November 30th.
"Yes, left to their own devices, OPEC countries will cheat. But, what I think is different this time is that almost all of the OPEC countries are flat out producing."
Given the current levels of production, Croft said Iraq likely doesn't have many more barrels to put on the market. Additionally, she noted a drop in production for Venezuela.
The one wild card appears to be Saudi Arabia, the world's largest oil producer. Croft insisted the Kingdom is ready to play ball.
"Saudi Arabia wants this deal to fly because of their own domestic priorities," explained Croft in regard to how the nation's economy is largely dependent on steady oil prices.
Specifically, with plans to take Saudi Aramco public, the Kingdom can't afford volatility in the coming year as the offering could be worth as much as $2 trillion in a stable market.
"I expect them to get the deal done. If Venezuela could cheat, they would, but I think they're all out of bullets at this point," Croft said.
Oil prices could be heading lower as OPEC dithers, the election raises fears and traders stand on the sidelines.
OPEC will dictate where oil prices head for the remainder of the year and into 2017 and the organization's failure to come to an agreement at its recent Vienna meeting is telling - the major sticking points are the same ones that have been in contention since negotiations began.
Everyone wants to boosts prices by cutting production but no one wants to actually cut. Iran wants to return to pre-sanction production levels, Iraq claims it needs the funds to help fight its war with ISIS, Nigeria along with Venezuela are facing economic hardship and in both places are trying to replace production lost due to conflict or lack of resources to maintain equipment.
At the last meeting, the consensus was that if any production cuts are to be made, the Saudi's will have to do the majority of the lifting, and they are not ready to commit to that because they face their own budget issues and dwindling cash reserves.
If OPEC fails to reach an agreement before or at their formal meeting at the end of November, then oil prices will fall to the low 40's and possibly the mid 30's. Driving this drop will be the factors that drove it lower at this time last year: too much supply and falling demand as we head into winter and the fallout from a potential Fed rate hike, which will mean a stronger dollar and lower equity prices.
Many traders are taking a pause for the remainder of 2016, anxious not only about OPEC's moves but also about the presidential election. Both candidates' policies could prove negative for oil prices.
With the final countdown to the election in hand, an 'ugly period' for the market is drawing near, says one economist.
"Clearly what we have right now is a market that is finally realizing that this could be a repeat of what we saw in the U.K. in terms of Brexit — not necessarily meaning that Trump will prevail, but certainly that it will be much tighter come election day," Steen Jakobsen of Saxo Bank told CNBC's "Futures Now" on Tuesday. "That's really the theme of the week, and that of course is coming in the form of increased volatility."
The CBOE Volatility Index, or VIX, surged above 20 for the first time since September 12 on Tuesday, while the S&P 500 fell to its lowest level in four months. The move comes as data compiled by RealClearPolitics shows that Hillary Clinton's lead over Donald Trump is narrowing.
"This is about much more than Clinton and Trump. Even if Clinton wins, I believe there will be more volatility post-election, because this is not about [the candidates], it's more about [Americans being fed up with the status quo]," he said.
For Jakobsen, the volatility will continue through December as investors weigh a potential Fed rate hike, regardless of who wins the White House next Tuesday. But the odds of a recession will increase sharply if the incumbent party prevails.
"It's almost guaranteed that a Clinton victory is 'safe' and the Fed will move in December. And, in my opinion, that will increase the probability of a recession in the U.S. to something like 60 to 70 percent," he said.
Jakobsen believes the Fed will opt to move next month in order to "regain credibility" with the market, but he does blame the U.S. central bank for manipulating equities in order to mitigate declines.
"That's what a lot of investors are missing ... since Greenspan the Fed has changed policy. Not from a dual mandate, but to actually steering the stock market in a direction that is supportive," he added.
Jakobsen advised investors to embrace the volatility and play defensively as a stronger U.S. dollar limits equity returns.
"If you come into this both as a trader and as a server of the market, I think you will do really well, because the volatility has nothing to do with Trump or Clinton, it has to do with a model that is preempted and trotted out by monetary policy that doesn't work and the lack of fiscal stimulus," he concluded.
When it comes to the word of OPEC, Dennis Gartman is urging investors to question everything coming out of the cartel.
"If I've learned anything in 40 years, it's that OPEC cheats. Every one of the members cheat. They cheat on themselves. They cheat on each other. It is extraordinary. To think otherwise is naive," the so-called commodities king said Tuesday on CNBC's "Futures Now" when discussing expectations that OPEC will not arrive at a deal for a production freeze.
For context, the cartel indicated in September that the framework for a deal had been agreed upon. Then OPEC member Saudi Arabia issued $17.5 billion worth of bonds in October.
The editor and publisher of "The Gartman Letter doubled-down on his bearish thesis calling for oil to head lower from current levels. Now, when seeking an honest indicator in the global market, Gartman recommended looking outside of OPEC toward Russia.
"The only fellow speaking the truth about crude oil was [Igor] Sechin," explained Gartman. Sechin, CEO of Rosneft, an oil company majority owned by the Russian government, recently expressed a desire to increase production. "When everybody else was saying that they were going to curtail production, Sechin said, 'Why should I?'"
Gartman noted that, despite OPEC's tough talk, the cartel's hand was forced when Rosneft indicated intent to produce heavily, not scale back. Russia's conviction, coupled with cartel discord has Gartman looking toward a potential breakdown for crude heading into winter.
"You probably have to take WTI down now to $40," warned Gartman. "You need to take it down there to stop ... production facilities here and to stop people from bringing on old wells that had been drilled and capped. At $40, they'll probably stay capped."
This notion comes alongside a note from Goldman Sachs wherein the bank agrees that further infighting among OPEC members could drive the price of oil to $40 per barrel.
"I think we take crude down into the low 40s, which is a break in trend lines as the cantango continues to widen," concluded Gartman.
"If I can tell people to do anything it's watch the term structure and watch the contango because it tells you more than anything. As the market was rallying a week and a half ago, crude was bidding for storage and the contango was widening. That told you that the peak was in. For right now, demand is weak, supply is large and oil prices want to go down."
OPEC did not immediately respond to a request for comment.
Crude oil is in the ultimate game of tug-of-war—and it's not going to change any time soon, says one of Wall Street's top commodity analysts.
A whipsaw week saw crude set its biggest weekly loss since mid-September, with Brent ending the week under the psychologically important level of $50 per barrel.
"There's probably a sweet spot between $50 and $55, but I think we're setting ourselves up for some sort of a disappointment at the OPEC meeting," explained Tom Kloza on CNBC's "Futures Now" last week. "I think the language is probably going to be thoroughly bullish. They'll pay lip service to some sort of a freeze."
However, talk has recently proven to be cheap—if not worthless—with the cartel. Crude traders doubt OPEC will be able to stick to its plans of a production cut, which helped send prices down last week.
The global head of energy analysis for the Oil Price Information Service (OPIS) highlighted that issues would arise in any agreement because a freeze would be occurring at record production levels.
From there, Kloza doesn't feel that non-OPEC member Russia would cooperate with any agreement. That would ramp up pressure on Saudi Arabia to reject the final terms of an OPEC freeze given the Kingdom's deep-seeded resentment of Russia's energy agenda.
Meanwhile, another issue could arise from OPEC member Nigeria, if the nation floods the market with oil. The country's production recently came back online following war-related outages.
Given the potential for these bearish developments, Kloza explained that he sees $50 as a "fair" price for oil for the remainder of the year, but added that there could be a little more turbulence before year's end.
Year-to-date, crude has gained nearly 33 percent. Ultimately, Kloza feels that oil will remain gridlocked as institutional investors with long positions will fight to keep oil above $50, amid more OPEC infighting coupled with seasonality pulling down on the price.
With this in mind, both oil producers and merchants are taking short positions with anticipation that the dips could be especially rough in the coming weeks.
According to a recent EIA report, the number of shorts on West Texas Intermediate (WTI) futures contracts have exceeded 540,000, a level not seen since 2007. This comes as banks have tightened lending standards and are requiring producers to hedge against future volatility.
"There's a seasonal trend for oil to really get hammered in the last two months of the year," concluded Kloza. "We're going to go higher from January to December of 2017, but I think it will be trouble about 40 days from now."
From early November to late December of 2014 and 2015, oil prices dropped by an average of 27 percent.
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