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The incredible crude collapse continues, as WTI crude oil futures fell as low as $47.55 per barrel on Tuesday afternoon, the lowest level in nearly six years. And energy expert Stephen Schork, editor of the widely read Schork Report, sees no reason for the selloff to end now.
"We're divorced from the economics, from the rig economics, so now fear and greed are in the market. Low prices are becoming the excuse for lower prices," Schork said Tuesday on CNBC's "Futures Now." "Trying to pick a bottom here is akin to the old adage of catching a falling knife. So don't try to pick the bottom, just ride the wave lower."
That's not to say that oil has no reason to slide. Even as oil production remains robust, "we've got really poor economic growth around the world," Schork said. "Japan is in recession, industrial production in China is falling, industrial production in India is falling, Europe is on the precipice of recession."
It's hard out there being a commodities king this year. Oil got crushed. Copper was obliterated. And soybeans got mashed. But Dennis Gartman has his eye on one commodity that met a particularly cruel fate in 2014: Gold
Despite bullion being just pennies away from posting its first back-to-back yearly loss since 1997, the self-proclaimed commodities king and author of the eponymous Gartman Letter told CNBC.com's "Futures Now" on Tuesday that he sees gold enjoying a solid 2015.
It appears to be the world's easiest trade: Taking a bullish position on stocks for the year's last five trading sessions. Over the entire history of the S&P 500, not only has the index tended to rise over the last days of a year, but it has tended to do so with greater consistency.
Going back to 1928, the S&P 500 has returned 0.14 percent in the average five-day period. But in the last five days of the year, the S&P has enjoyed an average return of 1.19 percent, according to Carter Worth, Sterne Agee's chief market technician. (Technically, the S&P 500 wasn't created until 1957, but historical data from the earlier 90-stock S&P index is used to extrapolate earlier S&P 500 performance.)
And while the standard deviation of the S&P's average five-day return is 2.64 percent, the standard deviation around the average gain in the waning days of the year is only 1.87 percent, Worth found. That tells us that we can expect less variation around the average—which is logical, since light trading is to be expected.
Worth has generally maintained a bearish outlook on the overall market. But when it comes to the last few days of the year, "the odds are high that they play out well," he said in a recent note to clients. "There is not only a higher-than-average return over the last five days, but there is less variability around the average."
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So will the last five trading days of 2014, which begin with Wednesday's short session, bring the expected holiday cheer?
The American economy is continuing to beat expectations, especially relative to the performance of many economies around the globe. And that's sending the U.S. dollar surging.
On Tuesday, the Commerce Department announced that in the third quarter, gross domestic product rose at a seasonally adjusted annual rate of 5.0 percent, nicely above the earlier estimate of 3.9 percent. Consequently, the U.S. dollar index, which compares the U.S. dollar to a basket of six currencies, jumped to the highest level since April 2006 on Tuesday.
Good economic news always tends to boost a nation's currency, but that is doubly true in the current environment, as the Federal Reserve is widely expected to raise short-term rates in 2015. Generally speaking, the better the economy, the sooner the Fed is likely to raise its federal funds rate target. And greater short-term rates would make it more attractive to hold dollars rather than other currencies.
Expectations of an earlier Fed move could certainly be sensed in Tuesday trading. The yield on two-year Treasury notes rose to the highest level since April 2011 after that GDP report.
By the work of Michael Block, "This yield is telling you that the market is nervous or expectant about a rate hike next year," the chief strategist at Rhino Trading Partners wrote in a Tuesday note to clients.
Call it the perfect nonstorm.
Natural gas was cratering Monday, as mild weather forecasts compound a supply surplus and a general energy market swoon.
Nat gas futures were as low as $3.12 per million British thermal units, which is the lowest level since January 2013, and represents a decline of 15 percent in two trading sessions. (The futures have ticked a bit higher after hitting those lows at 9:44 a.m. ET, but are still down sharply on the day.)
The backdrop for the move is Thursday's natural gas inventory report, which showed a year-over-year supply surplus for the first time since December 2012. However, it was not until this news was compounded by a mild seven-day forecast for the Northeast that nat gas futures really started to plunge.
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"Going into the weekend, it looked like the I-95 corridor was going to see pretty good demand," said Stephen Schork of The Schork Report, referring to the area from Boston to Washington, D.C., around Interstate 95. "But now we're looking at some pretty mild temperatures this week into the next, so you get a situation where people are just bailing on this market right now."
Nat gas bulls prey on extreme weather—hot in the summer, cold in the winter—because individuals and businesses use nat gas for both heating and cooling. But so far this year, much of the United States has seen mild weather in both summer and winter.
And with this latest forecast, traders who have recently gotten long seem to have finally given up on the hope that a repeat of last winter is ahead, when frigid weather met shrinking supplies to send nat gas futures as high as $6.49.
Something funny happened on the way to another huge year for stocks.
With just a week and a half left in 2014, the S&P 500 is up 12 percent, besting nearly everyone's expectations. Still, the best-performing sectors haven't been cyclical stocks that generally rise when the broader market is soaring and the economy is growing.
Instead, health care and utilities stocks have led the way, with 27 percent and 23 percent gains for those sectors, respectively.
Now, the big question is whether that trend will turn around in 2015—setting the stage for a more traditional bull market led by the sort of cyclical stocks that tend to lead in good times and lag in bad.
Over the past year, "people were in search of yield, and that really was the personality of the rally in 2014," said Jim Iuorio of TJM Institutional Services. "What I want to see is things further out the risk spectrum start to rally, and if that's the case, that's when I'll think that we're on a risk-on mode."
To Jonathan Golub, RBC's chief U.S. market strategist, the key issue is that stocks have surged—even as economic growth has been lackluster.
"The real question is, will the economy grow fast enough to support more economically sensitive cyclical names? This is the ninth year in a row where GDP grew under 3 percent," he pointed out.
In 2015, economists expect growth to finally surpass 3 percent, but "that's been the expectation for each of those nine years, and we haven't seen it," Golub said. "My gut tells me that the economists will prove to be a little bit more optimistic once against."
For that reason, the analyst is looking for the S&P to return 12 to 15 percent, including dividends, once again. However, he says the rally will likely be led by a mix of cyclical and non-cyclical sectors. Specifically, the strategist favors technology and health care stocks, and is less optimistic about industrials.
Toward the end of 2013, BlackRock's chief investment strategist for fixed income, Jeffrey Rosenberg, predicted that stocks would beat bonds in 2014. Now he says stocks are set to outperform bonds once more—and that poor bond performance will actually make that relatively easy.
From 2014 to 2015, "I think the big difference is really what kind of direction of returns we are talking about in the bond side," Rosenberg (who bears no relation to the writer) said Thursday on CNBC's "Futures Now." "Stocks can beat bonds, and it's a heck of a lot easier when bonds are not delivering the kind of returns they did in 2014."
By reasonable measures, equities indeed did beat fixed income in 2014, as Rosenberg had predicted. However, he did not predict that bonds would perform as well as they did over the course of the year, as rates fell despite widespread expectations to the contrary.
Over the past few years, the market calls made by bullish strategist Tom Lee have proven prescient. Now, he predicts that 2015 will be an even better year for the market than 2014.
"We remain bullish and expect the S&P 500 to reach 2,325 by YE 2015," he wrote in a Thursday morning note to clients.
With the S&P hitting 2,050 on Thursday, a close of 2,325 would represent a rally of more than 13 percent from current levels. That would easily best this year's 10.6 percent rally.
So how does Lee, the current head of research at Fundstrat Global Advisors and former equity strategist at JPMorgan, reach that target?
"What we're picturing is that earnings growth is around 7 percent or better, and we see the P/E expand," meaning that investors will pay more for each dollar of earnings even as earnings rise, he explained Thursday on CNBC's "Futures Now."
The reason this is a surprising take is that market valuations have already risen considerably, such that the S&P's forward price-earnings ratio is now a bit above historical averages. But that doesn't worry Lee.
"I know people are going to say, 'Hey, the P/E expansion's over, because we're already six years in and the market's at 16 times forward [earnings].' The reality is, if you look at every bull market that's lasted at least four years P/Es expand more than one turn a year until the bull market peaks," he said. "Hey, the market feels expensive, but the P/Es' going to keep going up until there's a recession."
Oil's swift and sudden decline is just the latest Federal Reserve-induced bubble to pop, and if history is any indication, stocks and real estate could soon follow, according to Euro Pacific Capital's Peter Schiff.
"If oil prices are artificially inflated by the Fed, so are stock prices and real estate prices," he told CNBC.com's Futures Now.
Crude has lost almost half its value since its June highs, as a supply glut and a rising dollar have conspired to crush crude. The pain has hit other commodities, as well. Gold, copper and even wheat has lost a respective 13, 13 and 15 percent from their recent highs.
According to Schiff, the brutal price action across the commodity complex is simply the result of the Fed pulling back from its massive stimulus programs. By Schiff's thinking, other assets are soon to follow if the fed continues its course.
"All these bubbles are going to burst because of the same pin, which is the Fed withdrawing stimulus."
As the year comes to a close and investors square up their portfolios, many may look to sell out of losing positions for tax purposes.
That could mean further weakness for beaten-down assets in the short-term, but may also present attractive opportunities for those looking to snatch up underperforming assets at a discount.
Buying assets that others have sold for tax purposes "most certainly is something that can be very useful at this time of year," said John Stoltzfus, chief market strategist at Oppenheimer. "I think it's a very good opportunity if you have a picture of where you think we're going" in the year ahead.
The idea behind tax-related selling is that individuals who have experienced capital gains in a calendar year can offset the taxes paid on those gains by showing losses on other investments. For that reason, in a year where many thing have performed well, badly performing assets can add to selling pressure.
Tax selling was certainly blamed for gold's plunge at the end of last year.The S&P 500 was up 27 percent in the year to December, while gold was down 25 percent during that time. Those who wanted to offset taxes on sales of winning stocks were assumed to sell gold for a loss—which would explain why gold continued to drop in December, and hit the dead lows of the year on Dec. 31st.
This time around, the obvious candidate for tax selling is crude oil, which has fallen almost 50 percent from its highs on the year.
Just as gold simply kept dropping at the end of 2013, "I would expect that you would see the same thing for the crude oil market. There [are] a lot of traders, a lot of positions, that are long right now, and they're going to want to liquidate before the end of the year," said NYMEX energy trader Anthony Grisanti of GRZ Energy.
Of course, it hasn't been a great year for many commodities. Gold, too, is off of its highs, which makes Bill Baruch of iiTrader think it could succumb to tax-related selling in the sessions ahead. Still, Baruch says the better trade isn't going short for the short-term, but looking for the buying opportunities that tax-pressured selling could create.
"What you want to take away from this is not only a bearish bias in underperforming commodities towards the end of the year, but also the late holiday gift it leaves," he told CNBC via email.
Investors can easily snap up battered commodities at the start of 2015, Baruch said. Additionally, "those commodities can also see a further boost as fund managers look to reallocate into underperforming assets, creating what can potentially be a bullish bias to start the year."
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