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Doug Kass hasn't exactly been dead-on with his market calls this year. In fact, Kass has been bearish all year, while the S&P has climbed 19 percent. But this bear isn't backing down just yet.
"Combine the likelihood that we're at the upper range for price-to-earnings multiples, we have political issues that are profoundly important, and we have some deterioration in the technicals," and Kass believes he has all the reason in the world to be short the market right now.
The president of Seabreeze Partners Management laid out each potential catalyst in depth on Tuesday's "Futures Now."
Reason one: Multiples will contract
When asked what he missed about the market's rise this year, Kass pointed at one factor: Multiple expansion.
"Frankly, we have to realize that most investors and strategists and talking heads on CNBC have made very little change in their economic forecasts, and forecasts for earnings, for this year and the next," Kass said. "What's happened is that valuations have gone up from 14 times at the beginning of the year to over 16 times now."
In other words, it's not so much that earnings have greatly improved, but rather that investors have been willing to pay more and more for those largely flat earnings.
"If we look at the 35 percent increase in the S&P since the beginning of 2011, 90 percent of that gain came from multiple expansion," Kass said.
A price-to-earnings multiple of 16 may not be far above the five-decade average of 15.2. But Kass still believes that given the current state of the market, it is inappropriate for multiples to be elevated.
"Given the structural global economic issues—disequilibrium in the U.S. jobs market, continuing leverage, et cetera—and the fact that all this is contributing to tepid economic growth, a discount to the average over the last five decades of 15.2 is probably more appropriate," he said.
(Read more: Why I'm buying into the market right now)
If stocks have any interest in correcting, they sure aren't acting like it.
After a 9 percent rally that took a break in late July, the market has been in a consolidation pattern, as it gathers steam for another move higher.
The fundamental argument for higher prices remains intact: We have an economy that's showing mild improvement, coupled with a Federal Reserve that has convinced markets that there is nothing to worry about. The Fed has been able to engineer a low-volatility environment across many asset classes, and although it could end badly, the Fed continues to be successful at persuading investors to take more risk.
"There has been a huge outperformance of the U.S. vis-à-vis emerging markets over the last, say, 18 months, an outperformance of roughly 30 percent," he said. "But I would say this is too early. I think emerging markets may rebound somewhat, but I think in general they will head lower."
On CNBC's "Fast Money," Faber added that there would likely be a rebound in long-term U.S. Treasury bonds.
(Read more: Marc Faber: Look out! A 1987-style crash is coming)
Marc Faber is not exactly known for his rosy outlook on equities. On Thursday's "Futures Now," he made the case that 2013 looks an awful lot like 1987, which is why he expects the market to drop 20 percent or more by the end of the year. (Read: Marc Faber: Look out! A 1987-style crash is coming)
After all, there's a reason he's known as "Dr. Doom" rather than "Dr. Feelgood."
But that doesn't mean he's universally bearish on equities. In fact, there's one sector that he's quite excited about right now.
"I think there's one group of stocks that should appeal to people who say 'I want to buy low and sell high,' and this is the gold mining sector," Faber said. "In general, the gold mining sector is incredibly depressed."
In general, two different factors have weighed on gold miners. First, gold mining stocks have always tended to be a leveraged way to bet on gold—meaning that as gold rises or falls, the miners tend to make a larger move in the same direction.
Indeed, as gold has dropped, miners' fundamentals have gotten destroyed. For the second quarter, the S&P 500 Metals and Mining industry had a bigger earnings decline than any other industry group, as earnings fell 78 percent (according to FactSet).
But the leveraged factor still doesn't explain why the Gold Mining Index is down 30 percent over the past five years, while gold is still up 50 percent. The second issue is that the SPDR Gold Trust has given retail investors a simpler way to bet on gold. So many who owned miners simply to get gold exposure went ahead and bought the gold ETF instead.
The S&P has rallied 19 percent in 2013, which is impressive by any measure. But the market did far better in 1987, when stocks added more than 30 percent from the beginning of the year to Aug. 8. The problem?
The market ended up tanking in the second half of that year—dropping 36 percent from the Aug. 25 peak to the October low, before closing out 1987 nearly exactly where it began.
And Marc Faber, publisher of the Gloom, Boom & Doom Report, predicts that the very same thing will happen in the back half of 2013.
"In 1987, we had a very powerful rally, but also earnings were no longer rising substantially, and the market became very overbought," Faber said on Thursday's "Futures Now." "The final rally into Aug. 25 occurred with a diminishing number of stocks hitting 52-week highs. In other words, the new-high list was contracting, and we have several breaks in different stocks."
Faber says that's exactly where we find ourselves this August.
"If you look at the last two days," Faber said, referring to Tuesday and Wednesday, "it's remarkable. We are close to the all-time high, at 1,709 on the S&P, and yet yesterday and the day before, there were 170 new 52-week lows. That's a very high figure."
(Read more: The S&P stalls—here comes the fall)
Gold is making an attempt to break out of its trading range, but we still need to see it close above $1,320.
Gold cleared out cleared shorts on Thursday when it reached above $1,296.90, and followed through to break above the psychologically important $1,300 level. And the rally didn't stop there; as shorts covered, gold reached a high of $1,313.6 in the session.
After putting in a new swing high of $1,316.20 in Friday's session, which is just shy of our light resistance point, the market has settled back slightly.
Traders need to understand that this is still a trading affair. After a week that was dominated by discussion of the taper, with some thinking it could come as early as next month, gold still did not break further. This tells us that Federal Reserve tapering is already priced into gold. And the big players, if you will, have already sold out.
(Read more: Gold heads for weekly loss as Fed doubts persist)
The gold trade has become very interesting over the past few months. Both the yen and the euro have recently rallied against the dollar, as the market believes that aggressive accommodation in Europe and Japan has begun to wane.
But despite the dollar's weakness, gold has traded in a indecisive sideways pattern of late. To me, that indicates that the sentiment in gold has changed, as the U.S. recovery has gained some mild strength.
Have you been paying too much for gasoline? The culprit might be corn. But a shift by the Environmental Protection Agency could alleviate the situation.
In an attempt to spur usage of biofuels, the EPA mandated that refiners blend a given amount of ethanol into gasoline. That requisite number of gallons of renewable fuels required has risen over time, and is set to rise further.
The problem is that fuel consumption is falling. And since the law enacted by Congress simply requires more gallons of biofuels to be used (rather than requiring a certain percentage of biofuels in each gallon), declining gasoline usage makes it difficult to blend in the growing amounts of ethanol required.
This is because few cars on the road can safely take gas with more than 10 percent ethanol, leaving refiners searching for another solution.
So to substitute for additional ethanol, refiners have bought Renewable Identification Numbers, known as RINs. These RINs have become a new input cost for gasoline, and they have been rising in price. Many have worried that as the standards for the amount of biofuels needed increases, the situation will become worse, driving the cost of RINs yet higher.
"The problem is that you're trying to put more renewable fuel into a declining market," explained Andy Lipow of Lipow Oil Associates. "If standards continue to rise, the industry will be in a situation where they can't comply. And as a result, refiners announced that they will reduce the amount of crude they're processing due to the high cost of RINs. That decreases supply [of gasoline], and over time, prices go up."
So as a palliative measure, the EPA has said it might lower the biofuel volume goal for 2014. Specifically, the EPA wrote in a Wednesday press release that because of the fact that most gasoline has no more than 10 percent ethanol, "EPA is announcing that it will propose to use flexibilities in the RFS [Renewable Fuel Standards] statute to reduce both the advanced biofuel and total renewable volumes in the forthcoming 2014 RFS volume requirement proposal."
This sent the price of RINs nearly 20 percent lower, and gasoline futures fell 1.3 percent on Wednesday.
(Read more: US refiners, plagued by RINsanity, see 'half step' on biofuels)
Even after the recent selloff, gold volatility remains lower than some might have expected. But there's a good reason why.
Gold started the Wednesday session lower, after ending Tuesday on its lows. During the Tuesday session, gold initially hit a low of $1,278.10, finding our next support level dead-on. But later trading became choppy, with gold hitting $1,272.50 before recovering, and then again swinging to new lows at $1,271.80.
After two Fed presidents hinted on Tuesday that they believe we will see tapering before the end of the year, and possibly as early as September, gold's path of least resistance has been to the downside.
If it stalls, it falls! That's certainly the case when it comes to this S&P 500.
As the market has filled in around the psychologically important 1,700 level in the S&P, we have seen a slight stall in momentum, as the continued record highs have come in drips and drabs.
Technically, we usually like to see a blow-off top with lower closes to embrace any type of a bearish divergence. However, after such a sensational yearlong rally, it feels like the levee may be indeed dry on this Chevy.
In order to sell this market, we need confirmation under 1,692 in the S&P E-mini contract. Technically, there is a lot of room to back-and-fill on the chart, as the multiyear highs that were fiercely shattered sit down at 1,576 in the S&P.
(Read more: The secret small-cap warning sign)
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