Top technician Jonathan Krinsky says the Dow is trading in its narrowest range to start a year ever. He explains what it means for the market.» Read More
Even though we are seeing record supplies for crude oil, and China's growth is moderate at best, the crude market has held up fairly well over the last few weeks. So what gives?
First of all, we have unrest in Egypt once again. In addition, we are in the peak of driving season, which historically has been bullish for crude demand and oil products.
(Read more: Egypt's Brotherhood stands ground after killings)
Corn, wheat and soybean futures are all trading at 52-week lows, with corn dropping over 30 percent on the year. But that doesn't mean consumers should budget less for English muffins or movie popcorn.
"It translates less than you would think," said Scott Nations of NationsShares and a CNBC contributor. "The cost of wheat that goes into the price of bread is relatively minor, compared to the price of the loaf."
This year's commodity crush came after a 2012 drought put severe pressure on crops, reducing supplies and spiking prices. As weather has been more favorable this year, record crop yields have been expected, and this has pushed prices down. But some back-of-the-envelope math tells us why this won't be noticeable at the supermarket checkout.
"As a rule of thumb, gross margins for food companies are in the 25-to-30-percent range, so that gives you an idea of what the cost of goods sold is" Jefferies analyst Thilo Wrede told CNBC.com. "And if the cost of goods sold is 65 to 70 percent of revenue, then input costs are half of that. And of those inputs, the biggest is energy—natural gas for cooking and for packaging, and oil for distribution. So grains are maybe 5 to 10 percent of cost of goods sold, depending on the company."
For that reason, while "you do you see a connection between input costs and costs on the shelf," grain prices don't have a huge impact on packaged food prices or on the performance of food stocks like General Mills or Kellogg, Wrede said. In fact, "it's really energy prices that you have to watch," according to the analyst.
Will the S&P overtake 1700? With so many major stops above that level, a test is almost guaranteed.
Equities are trading well below highs Friday morning, on worries that the planned stimulus coming out of Japan may not meet expectations. Consumer Price data out of Japan beat expectations and showed the biggest jump since 2008, causing the yen to rally more than a point.
We all know that a stronger yen puts pressure on the equities market, as traders look for a risk-off trade. We are seeing a flight to bonds this morning as a safety trade heading into the weekend.
(Read more: At last, inflation in Japan is speeding up)
The S&P traded to a high of 1689 on Thursday night before selling off more than 10 points. The market found resistance at the 1686 to 1687 level, trading to a high of 1686.50. A close above here will be needed to provide bullish momentum into the close. Meanwhile, a fall back and close below 1681 will be discouraging to the bull camp.
Janet Yellen will be the next chair of the Federal Reserve, and the bond market will love it. At least, that's the case made by Tony Crescenzi, an executive vice president, market strategist and portfolio manager at Pimco.
Chairman Ben Bernanke is widely expected to step down when his term ends in January. Speculation was all but confirmed when President Barack Obama told Charlie Rose on June 17 that "Ben Bernanke's done an outstanding job" but "he's already stayed a lot longer than he wanted to or was supposed to."
So who will the next chair be?
"It can't be known," Crescenzi said on Thursday's "Futures Now," but "the odds are highly in favor of Janet Yellen to be the first woman Fed chair" on the strength of "all her experience at the Fed."
Since October 2010, Yellen has been vice chair of the Fed's Board of Governors. She had previously served as the president of the Federal Reserve Bank of San Francisco.
The case for Yellen may have gotten another boost from a letter going around in the Senate. Signed by a third of the Senate's 54 Democrats, it urges Obama to appoint her, The Wall Street Journal reported late Thursday.
Crescenzi believe that the bond market also would be a fan.
"The bond market would probably rather have Janet Yellen in place, with her vast experience at the Federal Reserve," he said. "She would probably keep in place the transparency effort of the Fed, and also its communications efforts. As well, it looks like she would likely continue Ben Bernanke's program."
Crescenzi added, "There are too many uncertainties regarding the other candidates," so choosing on of them could mean "extra yield that investors demand for bonds," and "it would mark equities down."
We are in the middle of earnings season, and by most accounts, results have been good. Of the 233 S&P 500 companies that have reported, 68 percent of them have beat their earnings estimates, which is above the historical average. So why isn't the market trading higher?
There are two key reasons, in my view. The first is that expectations have been scaled back so dramatically. This means that even though companies are beating expectations, this is not exciting investors, because the bar has been set low.
Second, investors clearly anticipate that the Federal Reserve will soon scale back asset purchases, and that has caused some folks to take profits off the table. Many investors think the Fed is the only thing holding this market up, and whether this is right or wrong, that it is the perception.
How quickly things change. Gold's critical $1,300 level, which once served as resistance, is now support.
Although it matched the previous session's $1,348.70 high, gold failed to make a new high and stalled out against our $1,351.40 resistance level very early in Wednesday's session. Thursday is August option expiration, and as clocks tick, we are seeing a similar pattern to one we saw in April. Back then, when gold broke down through $1,500 and reached down to $1,323 before bouncing, many put option sellers found themselves with serious losses, and they were forced to either cover puts or buy futures to close the option position. This caused a quick bounce, and strong price action in gold.
(Read more: Why Detroit is good for gold: Ron Paul)
Bill Fleckenstein is a well-known bear on the market, and he has long been on the record claiming that stocks are overpriced and the market is due for a drop. But that doesn't mean he'd recommend being short. Actually, he says that shorting stocks has become all but impossible.
"Bad news doesn't really matter, and you can't really be short, because the Fed is putting in all this money," Fleckenstein said on Tuesday's "Futures Now." "It's been very difficult to see stocks decline—even bad news is pretty much shrugged off."
The contrarian says recent trading in stocks that reported below-consensus earnings is extremely telling. "We've had quite a lot of weak numbers emanating from big tech stocks, and it hasn't really done that much damage," Fleckenstein said.
For instance, while Google's Thursday earnings disappointed the market, and caused the stock to open 4 percent lower, buyers throughout the rest of the day and over the days following brought the stock back nearly exactly to where it was.
In a different sector, Coca-Cola's weak numbers led that stock to open 3 percent lower—before those shares, too, bounced back.
Gold bugs are zeroing in on $1,370. And with good reason: That will be the critical level for the metal in this week's trading.
Gold showed tremendous strength late in the day on Tuesday and into New York's CMX floor close, pressing the market through new highs and reaching $1,348.70. The rally also coincided with a lower-than-expected yield in a two-year auction, which also provided support to the treasury market, and signaled a move toward safety.
(Read more: Why Detroit is good for gold: Ron Paul)
The Detroit bankruptcy has been called an American tragedy, and one of the most heart-wrenching financial stories of our time. But according to Ron Paul, America's biggest-ever municipal bankruptcy could actually give gold bulls something to cheer about.
For Paul, the Detroit bankruptcy is the first of many municipal bankruptcies to come, and could even foretell what will happen to the United States as a whole.
"Long term, you can expect governments not to change," said Paul, who predicts that the U.S. will print more and more money as it continues to take on debt.
(Read More: How your city might pay for Detroit's money mess)
"We're going to see more Detroits, and eventually the government of the United States will be somewhat similar to Detroit, because people will give up their confidence in us, they'll give up confidence in the dollar, and eventually they'll give up confidence in our military. And then you'll see some real, real changes in this system, which has been built on a fiat dollar for the last 40 years," the former U.S. representative said on Tuesday's "Futures Now."
Why does this matter to gold? Because Paul expects to see gold skyrocket as the dollar crumbles. As he said on June 16: "As long as we have excessive spending and excessive computerized money, you're going to see gold go up. And eventually, if we're not careful, it could go to infinity, because the dollar will collapse totally."
The point is that as each dollar loses value, it takes more of those dollars to buy an ounce of gold, so the dollar value of gold rises. If people stopped accepting dollars, then no number of dollars could purchase an ounce a gold, making the gold price "infinity."
(Read more: Ron Paul: Gold could go to 'infinity')
Will the crude rally derail the economic recovery? Many traders have asked themselves that question, as crude is trading $10 higher than it was just a month ago.
The answer, however, depends how long oil stays at these levels. If oil remains at these levels for the remainder of the year, then yes, it will have a negative impact. But with that being said, I don't expect us to remain this high for too much longer.
The fundamentals of this market, in my opinion, don't justify $107 oil. We are very near record supplies in Cushing, and the demand for crude, while higher than it was, is nowhere near the levels we saw just a few years ago.
And as new technology and new efficiencies are implemented, crude demand should not increase in any substantial way. We are only a few weeks from the end of driving season, which means that one of the main drivers of crude is about to be removed.
CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.
Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.