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Crude oil prices won't see $60 anytime soon and in fact might not even get to $50. The fundamental picture for crude tells a story of a commodity that is headed back to the $30s. The current drawdown when analyzed should be credited to the weather rather than an uptick in demand.
Hermine, the storm that first plagued the Caribbean and Florida before moving into the gulf, caused a huge disruption in production and supply. Some estimates had over 25 percent of gulf oil production taken off line and millions of barrels imported from overseas had to wait out the storm before delivering their cargo.
Since production and supply routes have reopened, it's likely that next week's numbers will show a substantial build in supplies. In fact crude oil supplies have built consistently over the last few months and will continue to do so at least until the end of this one.
There has been continued chatter about an OPEC freeze in production which is unlikely to happen when members meet at the end of the month. There is animosity between some OPEC members, namely Saudi Arabia and Iran, and all of them have to pump as much oil as possible to pay the bills. And let's face it, how would any production freeze be verified?
What Russia and OPEC have agreed to is to form a working committee to study the issue –in other words they've agreed to talk more. And if there was a freeze—the world's third largest oil producer (the U.S.) would not be a part of it. A freeze would put OPEC production at about 2 million barrels above its quota, the U.S. is still producing over 8 million barrels per day, Libya and Iraq are producing more and the list goes on.
It's easy to understand that the world produces much more oil than it uses. There is talk of increasing demand, but in the U.S., the economy is growing at below 2 percent, Mario Draghi downgraded growth for the European Union on Thursday and the outlook for China is weaker. Where will the demand come from?
The fourth quarter and the beginning of the first are times of low demand for oil and this year is no different than last: the Fed is promising to raise rates and if it does, it will cause a worrisome drag on the economy—remember last year when the Fed raised rates in December, the dollar spiked and oil fell.
There is more oil being produced today around the world than last year at this time and economies are doing pretty much the same; it's the perfect recipe for oil to trade in the mid 30s before the year is out.
Lastly there are experts who feel the drop in capital expenditures will hurt production—if that is true it's not showing in the numbers as most countries are able to produce even more. We are still a long way from demand overtaking supplies.
Oil's struggles continue and according to one expert, investors shouldn't expect the commodity to break through $55 for a few years.
The problem lies with the oil glut as supply continues to outpace demand. Despite recent optimism around talks between Russia and Saudi Arabia that could result in reduced output, Dennis Gartman, editor of The Gartman Letter, doesn't see the supply issue easing.
Gartman's main focus has been on the oil futures curve, and that the contango has been widening as of late. Contango is the difference between oil contracted for near-term delivery and crude slated for delivery further in the future.
"There will be no freeze of any consequence," Gartman said Tuesday on CNBC's "Futures Now." "The contangos continue to widen, which tells you that there is an abundance of supply in the market. As long as the contangos continue to widen, as crude oil bids for storage, prices are going to head lower."
Even if Russia and Saudi Arabia formally agreed to put a cap on crude production in the future, Gartman sees U.S. oil producers continuing to flood the market.
"It's only the utterly incompetent drillers who can't make money at these prices," said Gartman. "So, the amount of crude oil that's going to come out of the Bakken, out of the Permian, out of Eagle Ford, is just going to be very large."
"The Saudis, the Iranians and the Russians have nothing they can say to us to tell us to stop our own production and we won't," he said.
As a result, Gartman believes that oil's supply concerns mean the commodity's price will be capped.
"The reality is we're going to be stuck for several years between $35 on the low end, and $55 on the high," he said.
Oil was up more than 1 percent midday Wednesday.
After months of churning in a narrow range, the markets could be in store for a very sharp move, according to veteran technician Ralph Acampora.
"I think if you look at the S&P 500 and put a Bollinger Band on it, it's getting very tight," Acampora told CNBC's "Futures Now" on Tuesday. Technicians often look at Bollinger Bands as a measure of volatility in the market — they tend to tighten during periods of low volatility and widen during periods of heightened volatility. The S&P 500 has not seen a 1 percent move in either direction since July 8 — its longest such streak since 2014.
"It's like winding a spring," he added. "This tells me that the move should be pretty dramatic either up or down, and I opt for the up because of the current leadership in technology and financials."
But what makes Acampora even more bullish lies beneath the surface.
"What's really impressive — and I've been looking at charts for 50 years and I've never seen [anything like this] — when the S&P 500 and Dow moved to new all-time highs, it was led by market breadth," said the director of technical analysis for Altaira Capital Partners. "That means the majority of stocks were stronger than the large blue chip averages. I don't think I've ever seen anything like that."
Acampora explained that the outperformance of small and mid-cap stocks lead him to believe that the market is broadening, and that could mean even more new highs in the near future.
"I'm fairly bullish longer term," he added.
The oil bulls are out again as one RBC oil expert sees oil heading about 50 percent higher over the next year.
Last week, Crude oil fell nearly 7 percent, hitting a three week low of $43 on Thursday before rebounding a bit on Friday following the weaker than expected jobs report.
While she believes oil prices will be volatile in the short term, RBC Capital Markets' global head of commodity strategy, Helima Croft, predicts that the commodity will rise as high as $60 in the year ahead.
"We may see as we head into the end of the year, as we get into December, [oil could move] into the $50s," said Croft last week on CNBC's "Futures Now."
In 2017, "we believe that's where we really start to work off the inventories and that's where we see us in the $60s."
But that very much depends on what could happen with the world's "stressed producers," as Croft calls them.
These are countries who are big oil producers, but find their production lines strapped, usually thanks to circumstances within their own borders. Croft raised Venezuela as a prime example, as the South American oil producer has struggled to maintain production amid roiling civil and political unrest.
The Andean nation's production has been impacted in the past by political and economic turmoil, and "if we have something like that happen again, that's a catalyst for moving higher," Croft said.
This is because such an event would strap Venezuela's oil production capabilities because of the unrest, preventing the country from pouring more barrels on to an already oversupplied oil market, thereby keeping supply capped in the face of what has been generally lower demand for oil.
Last month, the International Energy Agency said that global crude supplies were outstripping demand. However, Croft maintains that the oil oversupply looks to be easing, and that the persistence of the global glut has potentially been overblown. In a recent note, she wrote that "acute downside risks to the oil market are visible and are likely already mostly priced in."
For now, all eyes are now on the informal OPEC meeting slated for September, with the big question being whether a production freeze will be agreed upon.
"I think the market will move say $5 higher on the back of that because right now, nobody thinks OPEC has a heartbeat," she explained. "So if they announce a statement, I do think we will move higher."
Crude is now down more than 4 percent this year, after running above $50 in the first half of 2016.
As many investors view the August jobs report as a make-or-break moment for markets, one of Wall Street's largest banks says several other key pieces of data could ultimately help the Fed shift toward a September rate hike.
"Growth is set to rebound in the second half of the year after a very, very weak first half of the year," said Gabriela Santos of JPMorgan on CNBC's "Futures Now" on Thursday. "That's what matters for the Fed."
The global market strategist noted that, despite weak manufacturing data, her firm remains optimistic because of diminishing global risks and nascent inflationary pressures in addition to expectations for an improving U.S. labor market.
Therefore a strong employment report, compounded with these other key pieces of data, could ultimately lead to a near-term rate hike.
"We've seen a substantial improvement in the labor market since that very disappointing May number," added Santos. "What we're looking for is not just a strong headline number, but an all-around strong report with strength in payrolls, a drop in the unemployment rate and some further pickup in salary growth."
After a May where only 24,000 nonfarm payroll jobs were added to the economy, June and July saw 292,000 and 255,000 jobs added, respectively. However, Santos doesn't believe September's result has to be within the same range for the Fed to consider a move and added that 150,000 jobs could be enough to move the needle in 2016.
"We're coming on the back of months of a very strong rebound in the payrolls number," Santos said in reference to her expectations for ongoing positive developments, which include a rate hike. "If it doesn't happen in September, it's happening in December."
Investors are not fully prepared for a September rate hike, and they're too complacent about the chances for another one in December, according to money manager Jeroen Blokland.
"The U.S. economy has continued to grow showing decent numbers," said Blokland, senior portfolio manager at Robeco, on Tuesday's "Futures Now. "I think the Fed just has to get off the 0.5 percent at some point and this is probably a good time to do so."
Blokland, who has just under $300 billion in assets under management, believes the Fed has already missed a couple of vital opportunities for a rate hike.
"The Fed should raise rates sooner than later," he contended. "Jobs have grown at an above-average pace since December. Wages, income, spending are all growing at a decent pace. Consumer prices have risen as well."
If Friday's August employment report is strong, it'll give the central bank more ammunition to boost rates a quarter point to 0.75 percent.
"We have to take into account that these interest rates are still extremely low and that the Fed is looking for a gradual path to normalization," he said.
On Friday, Fed Chair Janet Yellen said the case for an interest rate rise "has been strengthened" by recent data, though she did not lay out a timetable for future hikes.
And as for stocks?
"The markets look a bit frothy. So, I think this could be an important hurdle for stocks to rise further from here," Blokland said.
Call it the curious case of gold and bonds.
Typically, the yellow metal and U.S. Treasurys move in opposition as investors shift from one to the other in search of a safe haven amid changing economic conditions.
However, Dennis Gartman, editor and publisher of The Gartman Letter, highlighted some very unusual activity that's been underway in recent months.
"Having been at this for 40 years, I always look for anomalies," explained Gartman on CNBC's "Futures Now" on Thursday. "It's very strange to me that, since June, as went gold so went the bond market."
"It doesn't make any sense to me," said Gartman. "If you go back over the course of the past many years, they move in contravention."
It hasn't been a great few months for oil, but one technical analyst believes crude could be headed for $70 per barrel in the near future.
Despite bearish outlooks like from Goldman Sachs, which predicted this week that oil will be trapped in the $45 to $50 range, Orips Research chief market technician Zev Spiro sees oil surging again. This time, it could rally about 50 percent above current levels.
According to Spiro, oil's impending rally has been building from a technical perspective since last year. Looking at a weekly chart of crude, Spiro points out that a "head and shoulders bottoming pattern" began in July of last year. An inverse head and shoulders pattern like the one on Spiro's weekly chart is seen as an indication that an uptrend could be on its way.
There's one more thing Spiro needs to see before he's sure.
"This large complex bottoming pattern could trigger a confirmed move above the horizontal neckline in the $50-$51 area," he said Thursday on CNBC's "Futures Now." "[This] would signal a primary uptrend with a minimum expected price objective in the $73 to $76 area."
But the surge may only come after more losses for oil in the short term. A daily chart of oil shows Spiro that a so-called "bearish evening star pattern" formed in August, which could spell more movement to the downside in the next few weeks.
"The pattern indicated minor resistance at the height of $48.75 and a possible pullback in the near term," said Spiro.
Nevertheless, Spiro maintains a bullish outlook for oil based on long-term patterns that he sees developing.
"Despite the potential for lower prices in the near term, the overall picture is bullish as prices are forming the right side of this large bottoming pattern," he explained.
Based on what he sees in the charts, Spiro argues that investors have two potential buying opportunities in oil. The first would be when oil pulls back to its current support around $43.50, and the second when oil breaks above Spiro's neckline area of $50 to 51.
On Friday morning, oil traded around $47.
If you're waiting for Fed Chair Janet Yellen to give some guidance as to when she will hike interest rates, don't hold your breath — says one Wall Street firm.
"The market is hoping that she's going to give us clarification, not only on long-term monetary policies, but also some clarity on current monetary policy," explained JPMorgan's Priscilla Hancock on CNBC's "Futures Now" on Tuesday. "[However], it's likely that the market is going to be disappointed. [It] would be wise not to expect too much from Janet going into Friday."
Ahead of the upcoming Jackson Hole conference where Fed Chair Janet Yellen is scheduled to speak, investors are indeed pining for some concrete insight as to what the Fed's next move will be. However, Hancock firmly believes that Yellen's approach will remain extremely cautious and that it will continue to focus on a variety of factors including risk management and global monetary conditions.
This notion does come amid some recent hawkish rhetoric from San Francisco Fed President John Williams and New York Fed President William Dudley, but Hancock doesn't not envision a rate hike in the fall.
"We're still calling for a December rate hike," explained Hancock. "It seems to me that the GDP numbers and inflation are moving us down the path to where the Fed is going to look to a December hike. That is our base case."
In the second quarter of 2016, U.S. GDP increased at a yearly rate of 1.2 percent as inflation has steadily declined through the summer months.
Going forward, JPMorgan anticipates an extremely tight trading range for yields to continue, regardless of positive economic data, as the market remains cautious alongside Yellen.
"It's hard for the curve to flatten significantly from here," said Hancock. "Likewise, it's hard for the curve to steepen." Hancock reasons that this is because central banks are buying a significant amount of bonds every month, which limits the amount of movement global investors from Europe and Japan can cause through the trading of U.S. Treasurys.
In the last month, the U.S. 10-year has lost just 1 percent while the two- and five-year notes remain unchanged.
"Everybody is searching for yield," concluded Hancock. "Now we have a situation where the technicals are 'uber' strong and the demand is extraordinary. Any tiny tick up in rates is just met by demand. That's keeping yields down and it's keeping spreads tight."
As equities continue to defy history and edge higher in August, a top Wall Street bank is keeping an eye on one key bearish indicator.
"We've had a couple of weekly candle patterns, which suggest that there's some indecision about the market," said Chief Equity Technical Strategist for Bank of America Merrill Lynch Stephen Suttmeier on CNBC's "Futures Now" on Thursday.
Suttmeier emphasized that while his team remains bullish on the S&P 500, traders should consider the candles in order to draw conclusions about the market's next move during the second half of August. Candlesticks show movement over a given period of time and the shape demonstrates highs and lows as well as opening and closing prices.
Suttmeier illustrated that in recent weeks, the technicals for the S&P 500 appear to be bearish and that the recent occurrence of two types of candles have been troubling. During the last week of July and during the second week of August, a "doji" occurred, which is when the open and close remain at comparable levels and ultimately represent a sign of indecision on Wall Street.
The other recent bearish candle was a "hanging man," which occurred during the first week of August. This type of candle is considered to be a risky pattern and shows an increase for the likelihood of an interim top. In conjunction, these candles could represent some near-term downside, but Suttmeier remains optimistic that a drop could set-up a base for gains in the long-term.
"We do think that the S&P could settle and find support somewhere around 2,147," noted Suttmeier. "However, the breakout should remain intact and we do see much further upside."
Year to date, the S&P 500 is up 7 percent and has gained 19 percent since the February lows. The index was relatively flat this past week and ended down less than 1 percent.
Ultimately, Suttmeier explained that, despite recent bearish signs in the market, the reasons for optimism remain strong.
"I think we've got a lot of things going for us: breadth, volume internals and the credit markets are firm," said Suttmeier while discussing why the S&P 500 has remained in a cyclical bull market since March 2009, the second longest stretch in history.
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