In 2014, defensive stocks have been king. Will that trend turn around in the new year?» Read More
Crude oil may have found its way off of the multiyear low it hit on Tuesday. But according to two traders, bearish dynamics on the supply and demand sides mean it's too early to call the bottom just yet.
"There are so many factors in the equation that are putting downward pressure," on crude oil, Brian Stutland said Thursday on CNBC's "Futures Now. "In the U.S., our oil drums are almost starting to fill up and hit max capacity. You have the Saudis now saying they're going to lower prices in the United States. You have weaker demand in China. And on top of that, a stronger dollar, and crude oil trades in U.S. dollars."
"I think you have to be careful trying to buy bottoms here on such a volatile asset class right now," Stutland concluded.
In fact, he favors making a bearish play on oil futures. Specifically, he advocates selling December crude oil futures at $77.50 per barrel, with a target of $74.50.
"We are just pumping more oil out of the shale plays here in the United States than you can imagine, and that is really putting pressure on oil," Scott Nations agreed. "$75, $74.50 is completely doable."
After a swift flush in the middle of October, stocks find themselves back in record territory. And according to Thomas Lee of Fundstrat Global Advisors, that roller-coaster action clearly points the way for the S&P 500 to rally another 13 percent in five months' time.
"Whenever the market has a deep decline like we saw, typically the bounce that follows is around 20 percent over the next six months," Lee told CNBC. "From the low of 1,850 or 1,900, that's close to 400 points, which would take us to 2,200 or 2,300 by April."
A level of 2,300 would be about 13 percent higher from Thursday's trading.
Yet Lee going on more than historical precedent. He says current market fundamentals set up well for continued gains in equities.
"It's been a pretty dumbfounding market, and I think there's been a lot of skepticism about the bounce," Lee said Thursday on CNBC's "Futures Now." "There are concerns that utilities have been rallying. Of course, (there are) the global issues. So I think there's enough of a wall of worry that the market can still surprise to the upside."
Is it about to get way worse for gold?
Bullion is down 5 percent in a week, breaking below the $1,180 level where gold futures had found support to hit a four-year low. And according to Mark Dow, what we're now witnessing is the second phase of the gold bubble collapse.
"2011 was the first phase of the gold bubble unwind. We consolidated for the past year. And it looks as though we're starting the second and more difficult phase of the unwind of the bubble," Dow said Tuesday on CNBC's "Futures Now."
As Dow explains it: "Gold benefited significantly in the post-crisis period from the monetary policy story. But a lot of fears in the monetary policy phase have proven unfounded."
In the 19th century, Britain was "the empire on which the sun never sets." In the present day, that moniker more aptly describes the reign of stimulative central bank policies. And that has stock market bulls shouting "Tally-ho!"
In the same week that the Federal Reserve ended its asset purchasing program, the Bank of Japan delighted markets with the announcement that it will increase purchases of Japanese government bonds and other assets. The central bank signaled its intention to continue its strenuous effort to improve Japan's economy and quash deflation expectations.
The question now is whether the European Central Bank will look to follow suit, as the ECB is set to announce a rate decision on Thursday, and follow that up with a press conference. Whether it comes now or in the near future, further ECB action is widely anticipated by many market participants, as the bank likely feels the need to combat a stagnant European economy that is also battling off deflation.
The great hope is that ECB president Mario Draghi will announce, or at least foreshadow, U.S. or Japan-style bond purchases.
"It's difficult to say exactly what the market's expecting, but clearly if the language remains unchanged, that will be a disappointment," commented Deutsche Bank FX strategist Oliver Harvey. "European risk assets are certainly looking for more direction from the ECB."
Read More ECB stimulus may lack desired scale, QE an option: Sources
Interestingly, on top of serious concerns about Eurozone growth, the BOJ's move could increase the odds for ECB stimulus. The euro has jumped against the yen, and if the ECB fails to act, the euro could grow even stronger—which is bad news for European exporters. That perception explains why the euro fell against the dollar in Friday trading, according to Kathy Lien of BK Asset Management.
Still, Lien doesn't expect to see stimulative action—just more dovish words. "The ECB probably takes more steps to talk down its currency," she predicted.
Gold prices got crushed on Thursday, dropping 2 percent and settling below the widely watched $1,200 level. And according to traders Jim Iuorio and Brian Stutland, it could get even worse for bullion—especially if the U.S. dollar stays strong.
"When you're talking about the gold trade, my opinion is that it is all about the dollar," Iuorio of TJM Institutional Services said Thursday on CNBC's "Futures Now." "If you look over the last six months, you have had a multitude of reasons to buy gold, and every one of them has been ignored. The only thing that really matters is the dollar."
The U.S. Dollar Index has been risen 8 percent since the beginning of July, and over the past two days has been nicely buoyed by the Federal Reserve's (well-telegraphed) announcement that it would end its bond-buying program. This is thought to be the prelude to a rise in the U.S. central bank's target rates. And if rates in the U.S. rise, owning U.S. dollars will become even more attractive than owning currencies such as the euro or the yen.
More specifically, Iuorio is focusing the U.S. dollar against the euro (the relationship that makes up the lion's share of the Dollar Index). Since the U.S. central bank is preparing to raise rates, and the euro zone's central bank may be primed to embark on further stimulative measures, Iuorio is with many market participants in predicting that euro weakness against the dollar will persist.
A rising dollar tends to hurt gold prices, because as the dollar increases in value, it takes fewer of those dollars to buy the same amount of bullion.
The Federal Reserve has just announced the end to its asset-purchasing program, which is known as "quantitative easing." But for one billion-dollar bond fund manager, that's no cause for concern. In fact, he says the QE program was none too significant for the economy or for markets.
"I frankly think QE3 was a complete waste of time," John Lekas said Thursday on CNBC's "Futures Now."
Lekas, CEO and senior portfolio manager at Leader Capital (which has $1.2 billion under advisory), says that the bond market has consistently indicated that the end of QE was not worrisome.
"Every time they've talked about ending QE, interest rates went down, the 30-year rallied, and that should shock people. Because in theory, ending that bond-buying program, rates should have gone up and bond prices should have sold off," Lekas pointed out.
But how could it be that the Fed's much-obsessed-over bond-buying program had a minute impact? Lekas says a comparison of two data sets shows something very interesting.
"During all the QE programs, [the Fed] bought $2.64 trillion worth of Treasurys. If you look at excess reserves, meaning that the bank just took that money and put it into the Fed—it's $2.67 trillion," Lekas said. "Meaning it was a nonevent, it never mattered, and I don't know why everyone thought it was so important."
Read More Mohamed El-Erian: 'QE trade is evolving'
After a swift correction, stocks appear to be back in rally mode. And according to MacNeil Curry, head of global technical strategy at Bank of America Merrill Lynch, fresh record highs in the S&P 500 are right around the corner.
"If you look at what we've seen transpire over the past month and a half, it looks just like a classic correction within the context of a larger bull trend," Curry said Tuesday on CNBC's "Futures Now." "So I think you have to keep your focus higher for a test and break of the September highs. It's likely we see all-time highs into year-end for the S&P."
The key, Curry says, is that while the S&P dropped just shy of 10 percent from the all-time high hit on Sept. 19 to the intraday low almost a month later, it didn't break below its bullish trend channel.
Over the past few years Peter Schiff has consistently predicted that gold was headed higher, and has consistently been proved wrong. On Thursday, he vigorously defended his calls in a heated debate with trader Scott Nations, who calls his confidence "dangerous."
Back on Oct. 25, 2012, with gold at $1,700, Schiff said on CNBC's "Futures Now" that "one day we're going to look back at $1,700 with nostalgia. People are going to be shocked at how inexpensive gold was when it could be snapped up for such a bargain price. And it's not going to take too long. I mean, just in a few years, we're talking gold $5,000."
When pressed on when that might happen, Schiff said: "I think you're going to see a big move some time in the next couple of years."
Two years later, traders are indeed looking back at $1,700 with nostalgia, but only because gold is trading closer to $1,200 per troy ounce. So what does Schiff tell those who bought gold on his recommendation back then?
"Keep buying!" he exhorted Tuesday on "Futures Now." "$1,700 is still going to look cheap compared to where the market is going to go. Obviously, it's going to take a little bit longer than what I believed at that time, because so many people are still fooled that what the Fed did worked…. I think it'll go through $2,000 very quickly, and people will be upset that they didn't buy gold at $1,700."
Yet that unrepentant reply didn't sit well with Scott Nations of NationsShares, who jumped in to ask Schiff: "When are you ever wrong? And how do you ever learn if you're never wrong?"
"First of all, I've been consistantely telling people to buy gold since it was under $300, so people who have been following my advice for the past 13 years and have bought gold are actually doing better than the people who just bought stocks," Schiff retorted.
"I think it's going to $5,000," Schiff continued, denying that his claim had been proved incorrect. "I never came on the show and said, 'Hey, I guarantee in two years, gold's going to be $5,000.' You always wanted to press me…. You asked me when. I don't know when it's going to happen!"
The market's jitters took a nosedive late last week, despite more worrying headlines. The fear factor is abating, but it still doesn't mean the wild roller coaster ride is over yet.
"We have already had a few years with volatility being very subdued, and thus we have been due for some normalized market movement," said Brian Stutland of Equity Armor Investments. "In a sense, we are back to normal."
After the panicky highs the CBOE Volatility Index hit on Oct. 15, that measure of expected market moves (which largely measures the expected likelihood of a major decline) has plunged 46 percent. Indeed, as the S&P 500 has bounced back from its lows, the market's fear gauge dropped nearly 25 percent in the last week alone.
"We did see a rapid rise, but what's more unusual is how quickly the VIX collapsed," said Tim Edwards, director of index investment strategy at S&P Dow Jones Indices. "Normally it spikes up and grinds down, so it is genuinely unusual how quickly it's decayed."
The VIX is still well above multiyear lows hit in June, yet many analysts say much of the volatility has been drained from the market. As a result, the VIX's plunge suggests the panic is largely gone.
"We're back in the 'no fear' zone, which is fine, because last week was the 'no fun' zone for investors," Scott Nations told CNBC. "With the S&P once again well above the 200-day moving average, and with solid earnings from everyone except Amazon, the market is signaling the all-clear."
Just one week after predicting a bear market in stocks was beginning, Dennis Gartman now admits his market call was all wrong. However, he's still not getting long, instead maintaining a neutral positon on the market as a whole.
On Oct. 16, Gartman told CNBC Europe's "Squawk Box" that a bear market was beginning.
"You stay in cash and you stay in short-term bonds and you don't move out," Gartman advised. "I don't like to think about it, but I'm afraid that this might be the very beginnings of a bear market that could last for some period of time. I think it's going to be more than a mere 7 to 10 percent correction…. This is the start of a bear market, and it could last for several more months I'm afraid."
Gartman made those remarks just hours after the S&P 500 closed at the lowest level since April, and nearly reached correction territory on an intraday basis. Six sessions later, the S&P is 5 percent above where it closed on Oct. 15 (and more than 7 percent above its Oct. 15 lows).
"In retrospect, I should have thrown all caution to the wind, covered any short positions, and spent cash and bought stocks," Gartman said Thursday on CNBC's "Futures Now." "Clearly, in retrospect, I should have bought it. I'm not that smart, nor should I ever be. Clearly, I missed the V-bottom. And I'm going to be okay with that fact."
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