The events in Ukraine this weekend could have a big impact on the gold trade.» Read More
So much for that September swoon.
Despite the recent losing streak, the S&P 500 is still poised to close out its best September in three years, and this all comes in the face of Syria, continued dysfunction in Washington and agita about the Federal Reserve (more on that later).
But stocks weren't the only surprise in September. The real shocker was the surprise performance in bonds.
The 10-year is having its best month since April.
(Read more: Expect a relief rally in bonds: JPM)
Curiously enough, the move up in Treasurys prices (yield and prices move inversely) started well before equities started to head south. And despite some decent economic data over the past two weeks, there hasn't been much renewed taper talk. Maybe that's because the market views Janet Yellen as more of a dove than Chairman Ben Bernanke.
(Read more: Brace for 'Octaper' or buy dips?)
So what is behind the move in bonds? Perhaps it's the mild decline in equities, which sounds pretty crazy. I think the more likely reason for the move is the continued chaos out of Washington. Shutdown aside, the government's very close to running out of money unless it raises its debt ceiling limit.
That debate will dominate the tone and tenor of trading in likely driving the price action in bonds Thursday. In the absence of any additional news, I believe the bond yields will continue to creep lower until we see significant employment data.
When most towns need trash cans, they use money raised from taxes or municipal bonds. But when a city that emerged from bankruptcy less than a year ago needs trash cans, a touch of creativity is required. That's why Central Falls, R.I., is trying to use a method more commonly associated with Internet start-ups and low-budget movies: Crowdfunding.
In 2011, Central Falls became the only Rhode Island city to ever file for bankruptcy. And while the impoverished 1.2-square-mile city of about 20,000 residents never missed a bond payment, pensions were slashed, and the city budget became very tight. So tight, in fact, that the city couldn't afford to buy trash cans for its public park.
"We have these plastic blue bins that we literally got for free from the state," explained Stephen Larrick, the city's director of planning and economic development. "They're not mounted to the ground at all. So if they're empty, they will just blow over. Or kids will push them over. And the trash gets everywhere."
In addition to being unsightly, the spilled trash increases the city's maintenance costs. And since the cans don't provide a recycling option, Central Falls is also paying more than necessary to landfills, and missing out on a Rhode Island recycling-based rebate.
But due to the city's precarious financial situation, simply buying trash cans proved a daunting task for Central Falls.
"The outlook is bleak to get additional things funded," said Larrick (who is a college acquaintance of the author). "I don't have a line item that would cover that."
That point was emphasized by Len Morganis, the city's administration and finance officer, who is responsible for ensuring that the city abides by its bankruptcy plan. "There's very little discretionary spending," Morganis said. "There is not a lot of room for, 'Hey, this just came up, let's put ten grand towards it.' That doesn't happen."
And the city won't turn to the bond market for additional funding anytime soon. The city hasn't issued debt since the bankruptcy, and according to Morganis, "that's a long way off. We haven't even talked about it."
After all, even though Moody's recently upgraded the city's credit rating from B1 to B2, Morganis said bond issuance "would still be too cost-prohibitive."
Gasoline futures have been falling since late July, and the decline has accelerated in the past few weeks. So can gas fall more? You bet it can.
As we move into the fourth quarter, we are entering the lowest period for gas demand, seasonally speaking. In fact, demand last week alone fell by 180,000 barrels.
Going back over the past few years, the charts tell a clear story: year after year, prices have declined into the winter. There is now a real possibility that we could see $3.40 to $3.50 on the spot contract very soon.
(Read more: Relief at the pump! US gas prices drop 6 cents a gallon)
Bank of America's top equity technical strategist warns that the 1,700 level is hugely important for the S&P 500. And now that the market closed below that round number, the index could be due for a drop down to 1,650.
"It is an important level," Stephen Suttmeier told CNBC on Tuesday's "Futures Now." The dip below 1,700 "calls into question the breakout that we just saw in the S&P 500. So that 'limbo line' is very important."
(Read more: Here's why I'm shorting the market today: Pro)
Indeed, the S&P was trading just above 1,700 a week ago before the Federal Reserve's announcement that it would not taper the pace of asset purchases quickly sent the market up to 1,729, an all-time high. But over the next four days of trading, the market traded all the way down to 1,695.
It's the market's most important question. And this expert says that traders are getting the answer all wrong.
Now that the Federal Reserve has shocked the market by maintaining the pace of its asset purchases, the market desperately wants to know when the Fed will, in fact, begin to taper its quantitative easing program.
Some speculate that the Fed will announce tapering in its December statement, while others contend that tapering could come as soon as October. But David Robin, co-head of financial futures and options at Newedge, makes a strong case that a tapering announcement is still further away than many think.
"I don't think they start tapering until the early part of 2014," Robin told CNBC on Tuesday's "Futures Now."
For Robin, October is out of the question. First of all, if economic conditions don't yet support a reduction of quantitative easing, then they still won't support tapering in a few weeks.
"Even if you get a strong payroll number in the early part of October, you're still going to have an above-7-percent [unemployment] rate, you're still going to have smoothed-out nonfarm payrolls growth below 200,000," Robin said. "That is not the recipe for removing tapering."
Plus, there is a logistical problem with tapering in October. As Robin points out, there is no press conference scheduled to follow the Fed's Oct. 30 statement. That means that Fed Chairman Ben Bernanke wouldn't be given a chance to ease the market's concerns following any tapering announcement.
Equity markets have been trading heavy for several days, despite the taper delay and some decent economic data. This means the market is probably due for a corrective pause.
Yes, the good headlines outnumber the bad. The Federal Reserve is still behind this market in a big way, with Chairman Ben Bernanke refusing to slow the pace of asset purchases. And it appears very likely that Janet Yellen will be the next Fed chair, which will mean more easy policies going forward.
(Read more: The million-dollar bet that markets will get rocky)
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.
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