Economist David Rosenberg is famous for turning from a bear to a bull. Now he's reconsidering.» Read More
I am not going to sugarcoat this: The durable goods number that was released Monday morning was terrible.
We expected to see orders for U.S. durable goods drop 4 percent, but they actually declined by 7.3 percent. A number this bad begs us to ask: Can the U.S. ever pull back on QE?
The reaction in the S&P e-mini indicated a belief that it won't happen anytime soon. Once that durable goods number was released, we saw the Dow erase all its early losses, and trade higher.
(Read more: The hidden reason why the Fed will taper: Pro)
Why would that happen after such a bad number? Because market participants believe that this indicates that there will be no tapering in September, and QE will continue. And I am beginning to believe that they are right.
After all, housing looks bad, and employment is not at the target that was set. And even though there have been some positives in the economy, we are still projected to grow by only 2 percent.
Is the Fed taking a September taper off the table? That's certainly what gold bulls are hoping for.
After holding the major $1,352 level, gold finished the week with tremendous strength, trading to new swing highs. Although the metal was just short of $1,400, it closed nearly $20 higher on Friday, reaching $1,399.90. Gold then continued the run on Sunday night, trading to $1,407.
This support for gold comes as investors view the taper as less of a sure thing. After new home sales data on Friday turned out to be a big disappointment, traders and investors found gold very attractive, betting that the $85 billion a month in bond purchases by the Fed will likely continue through the end of 2013. Weekly data have been the major mover for the metal and the dollar, as the clock is ticking for the Fed to make a move on the ongoing stimulus.
(Read more: The hidden reason why the Fed will taper: Pro)
During Nasdaq's three-hour shutdown, traders who pulled up a chart of the Nasdaq composite or the Nasdaq-100 index were treated to a spooky flat line. But since futures continued to trade, investors who wanted to hedge their exposure were able to turn the Nasdaq-100 e-mini futures.
Shortly after trading halted Thursday afternoon, the Nasdaq-100 made a quick move lower, from which it recovered over the course of 20 minutes. Jeff Kilburg of KKM Financial says that was a direct response to the technical malfunction.
(Read more: Cramer: We need a disaster plan!)
"When you saw the official statement come out that the Nasdaq freeze was on, traders sold the Nasdaq e-mini down 10 handles. When there's any type of uncertainty, panic sellers do come into the market," said Kilburg, who is a CNBC "Futures Now" contributor. "But it wasn't a market crash, it was a market glitch—and there's a big difference. Once we realized that, the market came right back."
For traders, the shutdown served as one more reminder of the importance of the futures market.
(Read more: Trading automation and Nasdaq's tech glitch)
Gold is not following through to the upside, and that leaves it vulnerable.
Although the Federal Reserve's minutes provided no clear answers, many analysts argue that when you listen to recent comments, and couple those with the minutes, a September taper continues to be a likely scenario. According to the minutes, Federal Open Market Committee members broadly suggested that as long as a careful decision is made based upon improving economic conditions, a reduction in easing will definitely be on the table for the September meeting.
Continuing to track market leadership, we have seen various sectors take the baton and run during the last few, Fed-influenced years. As someone who cut his teeth in the rugged bond pits of Chicago, I will always have a Treasury ticker in view. But lately, we have been laser-focused on the Nasdaq—and Nasdaq-100 futures specifically.
Since the June 24 equity lows, the Nasdaq-100 has indeed been a market leader. It logged a 8.8 percent gain from those June lows to the early August highs—compare that to the Dow's 7.7 percent gain and the S&P's 5.9 percent rise. Since those high prints, the thin, whippy August trading environment has eroded 4.5 percent off the Dow and 3.8 percent off the S&P, but the Nasdaq e-mini has dropped a mere 2.5 percent.
(Read more: S&P presents 'amazing opportunity' for traders: Pro)
Have you sold bonds lately? You're not alone.
TrimTabs reports that bond mutual funds and ETFs have seen $114 billion in redemptions since the month of June—$30.3 billion of which has come between Aug. 1 and Aug. 19 alone. But that should probably come as little surprise, considering the Bank of America Merrill Lynch's August Global Fund Manager Survey showed that a mere 3 percent of investors think long-term bond yields will be lower in 12 months.
The obvious culprit is the Fed's tapering talk. Ever since Fed Chairman Ben Bernanke said on June 19 that "the Committee currently anticipates that it would be appropriate to moderate the monthly pace of [bond] purchases later year," the 10-year yield has risen from about 2.15 percent to 2.9 percent remarkably quickly. The concern is that the Fed will decide to taper its bond-buying program at its next meeting in mid-September, and that the reduction of buying support will cause bond prices to drop and yields to rise.
But Lawrence McDonald of Newedge says investors are getting the bond trade all wrong. In fact, he boldly claims that the 10-year yield will finish the year at 2.35 percent, and "maybe even 2.20."
So what are investors missing? McDonald on Tuesday spelled out the bond market's three biggest misconceptions on CNBC.com's "Futures Now."
Bond yields will continue to rise, but don't say that the Fed has lost control. Actually, this is Chairman Bernanke's gift to his successor as he heads toward the exit.
After printing 2.88 percent on Monday, 10-year yields have drifted back down to 2.82 percent. Very soon, taper talk will morph into actual tapering, and Treasury markets will have to get used to less Federal Reserve sponsorship.
(Read more: For bond investors, it feels a lot like 1994)
Egypt, Libya, Syria, Iran and Iraq. These countries stand at the forefront of all the problems going on in the Middle East.
Iran, Libya and Iraq represent almost 5 million barrels of oil production a day. Throw in the fact that Egypt sits on the Suez Canal, through which about 4 million barrels a day move, and you can see why oil has held up so well, even though equities have been soft for a week.
After all, if the canal is closed, that oil will have to go around the Horn of Africa, adding many dollars and much time to the cost of delivery.
(Read more: Egypt risk premium built-in, limiting oil's gain)
Crank up Ace of Base, because the recent spike in the 10-year Treasury yield is reminding some investors of another banner year for yields: 1994.
Early in that memorable year, the 10-year yield rose by nearly 2 percentage points in three months (climbing from 5.6 percent to 7.5 percent). In 2013, bond yields have already risen 123 basis points (or 1.23 percentage points) since May 1, so a complete replication of that 1994 180-basis-point move would bring the 10-year yield above 3.4 percent.
Why look back that far? Because the recent rise in yields is without recent precedent. Setting aside 1996, 1994 marks the last time that the 10-year yield rose as much in 79 trading sessions as it did this year.
Another parallel comes in what was behind the rise in yields. Then and now, all eyes were on the Federal Reserve. However, while this year's rise has largely been driven by concerns about what the Fed might do, 1994's yield rally was driven by what the Fed actually did.
Back in 1994, concerns about inflation led the Fed to raise short-term interest rates. But the Fed's 1994 move seemed to take the market by utter surprise. In the present day, even if the Fed does choose to taper down its quantitative easing program in September, the move will have been widely expected.
"I think the situation today is somewhat different, as communication between the Fed and the market is fairly robust," said Lawrence McDonald, senior director at Newedge. "The Fed isn't going to repeat that mistake again."
Michael Block of Rhino Trading Partners similarly views Ben Bernanke's Fed as much more cautious than Alan Greenspan's. "The question is, what has the Fed's learning curve been since then? I'd argue that it's been very large," Block said. This time around, "they're going to stem the bleeding."
The reason that Fed signaling makes such a big difference is that the signaling itself becomes a policy tool. "Back then, there was no communication," Block said. But as he appraises the current situation, "My theory is that the Fed started talking about tapering because they wanted to avoid an overdone situation in credit and housing, and I think the Fed succeeded in doing that."
(Read more: Will US yield spike derail tapering plans?)
All eyes are on the Federal Reserve minutes that we'll see on Wednesday.
In the Monday morning session, equities are quietly trading in a lower range after suffering a selloff last week. The September S&P e-mini futures reached a low of 1,649 Sunday night, and are hugging that level early on Monday. We are still eyeing 1,347.50 as a level of solid support and will look to buy a fresh new low at that level. Still, if that new price is reached, buyers will want to see the market bounce off it, and not just sit there.
(Read more: Here's where the correction will stop)
As I mentioned, this week's biggest economic news will come on Wednesday, when we will get the minutes from the FOMC meeting that was held at the end of July. Traders will be looking to these notes in hopes of getting a better idea of what to expect from September's meeting.
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