On a terrible day for stocks, investors seemed to dump their equities in favor of just about anything else—except bonds.» Read More
The 10-year Treasury yield touched 3.0 percent on Thursday for the first time since September. And while that didn't prove particularly hazardous to the stock market, Jeff Kilburg of KKM Financial says equities will be watching yields very carefully from here on out.
"It's all about the manner we move," Kilburg said on Thursday's episode of "Futures Now." "Three percent to 3.25, that's not a big deal. But if we get there in a week or two weeks, that ferocious manner will really make people rethink their equity portfolio and their equity allocations."
(Read more: On tap for next year: Legit economic growth?)
The real test will come when the 10-year yield hits the next round number.
"If we see 4 percent on the 10-year yield in the first quarter of 2014, crawl into that bomb shelter, because that will crush every market out there," Kilburg said.
Dennis Gartman says the single best trade for 2014 will be one that worked big-time in 2013: shorting the Japanese yen.
"Continuing to be short of yen against the English-speaking currencies—selling yen against sterling, selling yen against the U.S. dollar, selling yen against the Canadian dollar—I think that's going to be the great trade" of 2014, Gartman said Thursday on CNBC's "Futures Now."
Shorting the yen against the U.S. dollar has been a hugely winning trade in 2013, as the dollar has risen a massive 21 percent against the yen this year as the Bank of Japan tries to spur inflation after a long, painful deflationary period.
Stocks may have sailed higher on the Federal Reserve's tapering announcement, but David Robin of Newedge warns that the structure of the tapering timeline means that if economic data continues to improve, the market will run into a serious problem.
"If we get a surprise piece of data, if all of a sudden in February we've got the unemployment rate at 6.6 percent and three or more consecutive 200-plus nonfarm payrolls numbers, I think all bets are off," Robin said on Thursday's "Futures Now." "I think that the Fed has opened the door to exaggerated reactions due to data dependency."
(Read more: Wits beat out speed in S&P's post-taper surge)
In its statement Wednesday, the Federal Open Market Committee said that the Fed would reduce its monthly asset purchases by $10 billion, to $75 billion.
The FOMC also made it clear that economic data will determine the pace at which that amount is cut to zero, saying that it "will closely monitor incoming information on economic and financial developments in coming months."
Asset purchases are not on a preset course, it said, "and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation."
(Read more: Full text of Fed statement)
Sometimes speed alone doesn't cut it.
When the Fed announced Wednesday that it would begin to taper its asset purchases, stocks momentarily fell before surging back, with the S&P finishing up 1.7 percent.
When the Federal Reserve announces its next move on Wednesday, some expect it to reduce its $85 billion monthly bond-buying program, targeting an eventual end to quantitative easing in late 2014. Others expect the Fed to begin to reduce the program in early 2014, or to finish it off by 2015. But Marc Faber has a different take altogether .
"The Fed will never end QE for good," the editor and publisher of the Gloom, Boom & Doom report said Tuesday on CNBC's "Futures Now." "They will continue because these programs, once they're introduced, usually keep on going."
The Fed will announce its decision at 2 p.m. EST on Wednesday, and Fed Chairman Ben Bernanke will follow that up with a 2:30 p.m. news conference. Expectations for the meeting are mixed, but more that 50 percent of Wall Streeters expect the Fed to taper its QE program in either December or January, according to the CNBC Fed Survey. As economic data have improved, many investors are guessing that the Fed no longer considers QE to be as vital as before.
(Read more: Fed taper expected sooner: CNBC survey)
But Faber said the good times cannot last.
"The economic recovery, or so-called recovery, by June of next year, will be in the fifth year of the recovery," Faber said. "So at some stage the economy will weaken again, and at that point, the Fed will argue, 'Well, we haven't done enough, we have to do more.'"
Marc Faber is well-known for his bearish take on stocks as well as his theory that the actions of the Federal Reserve will end up crushing the value of the U.S. dollar. And that is precisely why his latest recommendation is so surprising.
When asked whether investors should keep their money in cash on Tuesday's episode of "Futures Now," Faber responded: "Cash, yes. I think the most hated asset at the present time is cash."
This despite the fact that his monetary view hasn't changed.
"I agree that with the Fed's policy, cash loses purchasing power," Faber said.
The problem is that Faber thinks the market could crash, but only after rising further.
Most investors are split on whether the Fed will announce a reduction in its $85 billion monthly bond-buying program on Wednesday or in the first quarter of 2014. But some are starting to argue that the bond market is already looking beyond the first reduction, or tapering, and onto the future of quantitative easing.
"The market is anticipating a taper, and whether it's tomorrow, whether it's January or March, the process has begun," said Peter Boockvar, chief market strategist at the Lindsey Group. "So investors need to take the analysis one step further, and see whether the Fed is looking at this as a one-and-done ... or if this is the beginning of the end" of QE.
The market last predicted a taper in September, on the strength of guidance from Fed Chairman Ben Bernanke. But partially due to threats of a government shutdown and U.S. debt default, Bernanke decided to hold off. Boockvar says the bond market is once again geared up for a tapering announcement.
"The bond market, at a 2.85 yield [on the 10-year note] is back where it was a day before the Fed chose not to taper, therefore implying that the Fed has teed up the market—or the market has teed up the Fed—in anticipation of an eventual taper," Boockvar said. "So in the market's eyes, it's a matter of when, not if."
(Read more: Treasurys edge higher ahead of Fed meeting)
Traders are warning that many rocky moves could be ahead in the last trading weeks of the year. This, after stock futures took a massive tick down to a five-week low in late trading before recovering, with no apparent reason behind the drop.
"The market was relatively thin, and somebody came in with enough volume to move the market," said Rich Ilczyszyn of iiTrader. "Stops were triggered, and it kind of snowballed down from there."
The swift move took the S&P 500 E-mini futures, the Dow Jones E-mini futures, and the Russell 2000 mini futures all to five-week lows at 10:08 p.m. EST Sunday. Then, after shaving off as many as 11.5 points—or 0.65 percent—in a minute, the S&P 500 came back by 4 a.m. EST, and opened higher on Monday morning.
Gold could be set to bounce back in the beginning of 2014, as the overwhelmingly bearish sentiment in the market may present an appealing opportunity to get long the battered metal for a trade.
"Next year could be a totally different picture for gold," said George Gero, precious metals strategist at RBC Capital Markets.
He believes that improving fundamentals, plus a turnaround in sentiment, could finally put a bottom under the precious metal.
"Every analyst I've been seeing or talking to in the past month has gotten pretty bearish because of the price action. And as open interest has shrunk along with the price, a lot of money has been allocated out of gold and to the stock market," Gero told CNBC.com.
"There hasn't been too much inflation to make gold investors jump in at lower prices and bargain-hunt. But I believe that you could find some reallocation to gold next year, because the lack of inflation could be disappearing."
Mark Dow, a former hedge fund manager whose bearish gold and silver calls have proven prescient, similarly believes that the precious metals have become ripe for a bounce.
"Now is a really good time, risk-reward-wise, to put on a long gold or a long silver trade," Dow said on Thursday's "Futures Now." With gold near the year's low at $1,179, "you could see that the stops are nearby, and you could get a bounce to $1,400 or something along those lines, or maybe even more."
Russ Koesterich, the chief investment strategist at BlackRock, empathizes with investors who are skittish about the stock market. But, he said, they really have no choice but to buy equities.
"If someone asked me, how would I describe my position going into 2014, I'd say that I'm a nervous long," he told "Futures Now" on Thursday.
People have good reason to be on edge, Koesterich added.
"I think that people should be a little bit more nervous," Koesterich said. "It's good to have that fear, because the reality is that we've had big gains, and those gains were mostly predicated on multiple expansion."
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