Cornerstone Macro's Carter Worth says the market is due for a major reboot, and he has the charts to prove it.» Read More
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."
Is a new Greek drama on tap for markets?
It was two years ago that a potential Greek exit from the Eurozone became the market's prime concern. But fresh concerns emanating out of Greece could once again have dire implications for global markets, Larry McDonald warns.
In February, 180 members of the 300-seat Greek parliament need to vote for the Greek president. If the support of these 180 members cannot be garnered, then a snap parliament election is held. This could lead to a victory for the Greek far left, which is opposed to European Union bailout measures. The political moves of a newly empowered left could thus lead to a Greek exit from the euro zone.
"Greece never left [the EU] in 2012, but the threat of it in June 2012 took U.S. equities down anywhere between 9 and 11 percent," commented McDonald, the head of U.S. strategy at Newedge. "We just went through that, and I think this is definitely a part of why we sold off, because the situation in Greece is definitely impacting the euro zone."
After the October dip, stocks may be getting ready to rip.
The S&P 500 is staging a bit of a recovery after last week's plunge.
Instead of that swift decline being a reason for concern, a historical analysis of similar situations suggests that the next few months could be sweet indeed for the market. In short, not even October jitters are enough to prevent the historically strong months of November and December from turning positive performances.
In 11 past years, the S&P has hit a 12-month high in September before correcting at least 5 percent from that high at some point in October, according to Jason Goepfert of SentimenTrader. Goepfert went on to find that in the Novembers that followed, the S&P had a positive month in eight of 11 times. Even more impressive, the market was positive through December in 10 of 11 years, gaining at least 3 percent in each year besides the infamous 1929. (Historical data from the earlier 90-stock S&P index can be used to extrapolate S&P performance dating back before the creation of the S&P 500 in 1957.)
After a treacherous, highly volatile, overall negative weeks for stocks, earnings have had a muted impact on the market's moves. Yet with a massive slate of reports ahead, including results from behemoths like Apple, IBM, Coca-Cola and McDonald's on Monday and Tuesday alone, corporate results and guidance could finally dictate trading.
Amid the market turmoil, "there's been a de minimis focus on earnings. It's affected single stocks, but it hasn't had the typical spin-over effects into other companies and sectors," CovergEx Group chief market strategist Nicholas Colas said. "It certainly hasn't been the usual earnings season so far."
Thus far, results have looked reasonably good. Of the first 82 S&P 500 companies to report results, 68 percent have beaten earnings estimates and 63 have beaten revenue estimates, FactSet.
While that is below the recent historical average percentage of beats on the earnings side, that is above what investors have come to expect on the revenue side, FactSet senior earnings analyst John Butters reports.
Ultimately, it will likely be revenues that shed light on the state of the global economy—which is particularly important role now that global jitters have shaken risky assets.
"We started the quarter probably a little more focused on revenues than we were on earnings, and now we are even more focused on revenues," said John Traynor, chief investment officer of People's United Wealth Management, which manages $5.5 billion in assets.
As stocks sold off nearly 8 percent since hitting an all-time high on Sept. 19, gold prices have hardly reacted, rising just 2 percent in that time period. That's a big disappointment to those using gold to hedge against stocks—so much so that some traders view the muted move as a reason to sell the precious metal.
"We bought it a couple of weeks ago as kind of a protection play on the market, because we just felt volatility creeping back into the market," Brian Stutland said Thursday of CNBC's "Futures Now." "But with the weakness, you should have had a bigger rally in gold. It kind of, actually, to put it bluntly, sucks that it didn't go higher."
In fact, Stutland is now looking to sell his fresh gold holding.
"You have to start to consider taking that back off the table, because we should have gotten a bigger pop," he said.
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.