The Nasdaq is nearing record highs—which means it's set to stall out, says Jim Iuorio.» Read More
The bulls continue to dominate this market.
Equities enjoyed strong trading into the close on Friday, as the market reached new all-time highs. However, heading into the Monday morning open, we have seen a very small range in the S&P futures.
This week is light on U.S. data, and traders will look to ride the momentum from Friday's bad-news-is-good-news payrolls number. The unemployment rate dropped, but fewer jobs were created than was expected, and this will help investors feel more comfortable that the Fed will maintain its backstop.
Although a tapering of quantitative easing is certainly coming, Friday's disappointing number makes it less likely that it will come in September.
(Read more: July jobs data more gravity than 'escape velocity')
Want to know where gold is going next? Then you better keep a close eye on Friday's close.
Gold started Friday morning much lower. Sentiment in the gold market was bearish, after ADP, GDP, jobless claims and ISM manufacturing numbers all beat expectations within the past 48 hours.
That left all eyes on the July jobs data, which bucked the bullish trend and missed expectations. While economists had expected to see a 184,000 increase in nonfarm payrolls, the number came in at 162,000. Gold had been hugging $1,284 to $1,285.60, the prior lows, but rallied nearly $35 off of the disappointing news.
(Read more: July jobs data more gravity than 'escape velocity')
The market got some pretty good data Thursday. But I still see some serious red flags for the U.S. economy.
On Thursday morning, we saw a lower-than-expected continuing jobless claims number showing that fewer people applied for new unemployment benefits in the week ending July 27 than in any week since early 2008. In addition, China's official Manufacturing Purchasing Managers' Index rose to 50.3 for July, above the 49.9 that economists expected.
(Read more: China PMI could mark end of negative data surprises)
On the other hand, growth in U.S. gross domestic product is at 1.7 percent, mortgage applications are at a two-year low because of rising interest rates, and earnings have been mixed at best. I believe this is a market driven primarily by Federal Reserve policy.
As gold has gotten crushed this year, hedge funds have backed out of the trade, according to Anthony Scaramucci. And the managing partner of SkyBridge Capital, often viewed as one of the most-connected people on Wall Street, believes there will be no reason for them to get back in anytime soon.
"Guys like [John] Paulson are always going to have a steady position in gold," Scaramucci said. "It's a very good diversifier for their overall aggregate personal net worth. But in general, most of the hedge funds have backed out of this trade."
Scaramucci believes that "when they write the history of this period," financial historians will remark that "gold should've worked, it could've worked, it would've worked, but it didn't work in this environment."
He then went on to list the four reasons why it won't get any easier to own gold.
1. Central bankers are exercising caution
Scaramucci notes that investors often hold gold to hedge against an inflationary catastrophe. The problem? The inflationary wolf is not exactly knocking at the door.
"There's a lot of very wealthy people that are going to own gold as a defensive hedge for what they're fearing is that whole Weimar Republic thing, where either the Europeans or the United States aggressively prints money, where the multiplier effect kicks in on the banking side, and you get this out-of-control inflation," Scaramucci said, referring to hyperinflation that occurred under the German democratic system in place between 1919 and 1933.
But Scaramucci says these gold bugs just aren't doing their research. "If you read the minutes from the Federal Reserve, or if you look at the essays that Ben Bernanke just recently published, you will discover that your central bankers, particularly in the United States, understand this issue very well. And that's one of the main reasons that gold has not worked in this environment."
The Fed minutes make clear that the Fed is keeping a close eye on inflation, and is keeping risk factors in mind. For instance, the latest Fed meeting minutes, from the July 18-19 meeting, note: "Although the staff saw the outlook for inflation as uncertain, the risks were viewed as balance and not particularly high."
Round integers like 1,700 on the S&P 500 are well and good, but savvy traders have their minds on another number: 2.75 percent
That was the high for the 10-year yield this year, and traders say yields are bound to go back to that level. The one overhanging question is how stocks will react when they see that number.
"If we start to push up to new highs on the 10-year yield so that's the 2.75 level—I think you'd probably see a bit of anxiety creep back into the marketplace," Bank of America Merrill Lynch's head of global technical strategy, MacNeil Curry, told "Futures Now" on Tuesday.
And Curry sees yields getting back to that level in the short term, and then some. "In the next couple of weeks to two months or so I think we've got a push coming up to the 2.85, 2.95 zone," he said.
(Read more: US Treasurys widen losses after data hints at less stimulus)
Jim Iuorio, the managing director of TJM Institutional Services and a CNBC contributor, thinks the old highs for the 10-year yield are in the cards, but he says that's because of expectations about what Federal Reserve Chairman Ben Bernanke might be thinking.
"The chairman wants to control volatility by sending rates up to a higher level, but he wants to control the rate at which they go higher. The spike up to 2.75 that happened three weeks ago alarmed him," Iuorio said. "Now the market thinks he's ready to start opening the door a little further. So we're headed back to those old highs."
(Read more: Why I'm selling bonds ahead of the Fed)
Is the stock market in a bubble? If not, it's awfully close to one, Robert Shiller argues.
"We have been in an up market since 2009, and it's been quite dramatic," he said on Tuesday's "Futures Now." And as the market rose, "it brought more and more people to regret that they didn't get in in 2009," he added. "So yes, it does have aspects of a bubble."
But what is a bubble, exactly? In the second edition of his book "Irrational Exuberance," the economist defines "speculative bubble" as "a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase."
A professor of finance at Yale, Shiller believes that this could accurately describe the current state of things. With its precipitous rise, the market has "certainly generated stories that are optimistic," he said.
Bond yields are destined to go higher—the only real question is how quickly.
It's been 15 days since the 10-year yield printed its 2.75 percent high. At that point in time, it was clear that Chairman Ben Bernanke was alarmed by the volatility and dramatic price action caused by the mere mention of the taper. After an aggressive, Fed-wide backpedal, they've been able to contain volatility and engineer stability.
My belief is that the Fed doesn't want long-term rates to go much lower than current levels, for fear that it could put us right back where we were a couple months ago, and create the potential for market shocks. So on Wednesday, I believe we will get mild taper talk which will move the market in the direction of the July 5th high in yields.
(Read more: Wall Street pros: Fall taper priced in...sort of)
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.
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