It may finally be time to go against the crowd and play the dollar for a swift slide.» Read More
After three tough years for gold, could a bullion turnaround finally be in the cards?
That's the argument made by Lindsey Group's chief market analyst, Peter Boockvar, who says that the Federal Reserve meeting minutes released this week point to a reversal for the precious metal.
"The three-year bear market in gold, in my opinion, is over, because yesterday in their minutes, the Fed officially threw their hat in the global-currency-war ring," Boockvar said Thursday on CNBC's "Futures Now."
Boockvar refers to the unease that Federal Open Market Committee officials voiced about the dollar's strength against foreign currencies.
"Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could have adverse effects on the U.S. external sector. ... A couple of participants pointed out that the appreciation of the dollar might also tend to slow the gradual increase of inflation toward the FOMC's 2 percent goal," the minutes record.
Boockvar's interpretation is that after standing by and watching a bevy of central banks around the world take measures (lingual or market-based) to reduce the level of their currencies, "the Fed finally decided, 'You know what? I want to be part of this battle.' And to me, that's the last missing piece in the gold bull case in the context of a three-year bear market."
The Federal Reserve's stimulative policies have been widely credited with improving the American economy and juicing the stock market. But Peter Boockvar, a well-known critic of the central bank, metaphorically says that one group has been killed by the Fed's policies: savers.
"In the whole discussion of the Fed's desire to improve the economy by trying to convince people to borrow and spend and invest, the saver gets lost in the sauce," Peter Boockvar of the Lindsey Group said Thursday on CNBC's "Futures Now." "Now that we're six years into this grand experiment, and the Fed just wants to keep this going, I wanted to be a voice for those savers that are suffering from this policy."
Boockvar points out that while the stock market has soared partially as a consequence of low interest rates, those low rates have proven extremely painful for a large group of people.
"This is not a free lunch. Someone is suffering from this, and it's the saver. There's $9.5 trillion sitting in zero-interest-bearing securities, whether it's a money market [fund], a checking account, or a savings account," he said.
The dollar has enjoyed an incredible run over the past three months, rising 7 percent against the basket of currencies in the U.S. dollar index. And while currency expert Jens Nordvig says the move has legs, he believes that a continued dollar rise will now depend on strength against riskier emerging market currencies.
"I think we could see batches of enhanced U.S. dollar strength against select emerging market currencies, so that's going to be a little different from the composition of dollar gains we've seen in Q3," said Nordvig, global head of foreign exchange strategy at Nomura, on Tuesday's "Futures Now."
The euro actually makes up 57.6 percent of the dollar index (often known by its index symbol, DXY) so recent weakness in the euro has certainly been a tail wind for that measure of dollar strength. But Nordvig predicts that the weakest currencies in the fourth quarter will be emerging market currencies like the South Korean won, the Malaysian ringgit and the South African rand.
Ahead of the monster September jobs report, S&P futures began to tick upward in an almost uni-directional move. And some call that an indication that some major players in the market got the bullish information early.
"I don't know of any issues or problems with the release of the data this morning," said Gary Steinberg, Bureau of Labor Statistics press officer.
At 8:30 a.m. ET, the Bureau of Labor Statistics reported that 248,000 jobs were created in September, and the unemployment rate fell to 5.9 percent (well above estimates of 215,000 jobs and 6.1 percent unemployment). They also significantly revised upward the July and August jobs numbers. The move sent S&P 500 futures on a significant rally, and seriously punished Treasury note and gold futures.
Read More US created 248,000 jobs in Sept
But several traders' eyes were drawn to the move that S&P futures made ahead of the report. From 7:32 a.m. to 8:06 a.m.. the S&P e-mini December futures rose steadily and without much hesitation. In that time period, the S&P futures were positive in 13 minutes, and negative in only five (the rest of the minutes were unchanged).
"Looks like a blatant leak to me," said Jeff Kilburg of KKM Financial.
"There are definitely people who are saying there was a leak," noted Jim Iuorio of TJM Institutional Services. "I think there's a solid chance of that."
However, Iuorio would bet against a leak, given that knowing the number wouldn't necessarily be enough to gauge where the market would go. Indeed, the futures initially fell at 8:30 a.m. before turning around, likely due to initial concerns that the number would lead the Fed to raise benchmark rates earlier than previously anticipated.
Even as stocks are sliding hard, the biggest options traders have been making bullish wagers on stock indexes—which could indicate that the big money senses a buying opportunity in the market.
The S&P 500 fell to a nearly two-month low on Thursday, and at one point looked primed to have the first four-day losing streak of the year. But on Wednesday and Thursday, some of the day's biggest trades have been sales of put options on the S&P 500 and the Nasdaq 100, as well as sales of call options on the VIX.
Since the VIX tends to rise as stocks fall and traders become fearful, these institutional-sized trades on the CBOE Volatility Index indicate that major options players think the worst may be over.
"What we've seen in the last day or so is people starting to unload their insurance, take that protection off," said Brian Stutland of Equity Armor Investments. "To me, when we get the market down and yet people are taking insurance off, it tells me that the smart players out there are trying to buy into this market—remove the insurance, and play to the upside in stocks."
Stutland says that with so much money behind them, these trades should carry some weight in investors' minds.
"When you talk about volatility, these are the smart traders out there in the world," he said.
Crude oil has gotten crushed this week, with West Texas Indermediate futures falling below $90 per barrel on Thursday for the first time in more than a year. And though oil has staged a mild comeback over the course of the session, crude oil futures are still 15 percent below the high set in June.
At this point, traders say bearish fundamentals and an awful-looking chart could point to more downside ahead for oil.
The main cause for the crude decline comes out of the Middle East, where Saudi Arabia surprised the market by opting not to cut production even in the face of declining prices. And according to trader Brian Stutland, "the Saudis are just starting to feel the heat. U.S. production has really put some pressure on them."
Yet even as supply will be higher than expected, Stutland noted on Thursday's "Futures Now" that the European economy continues to be in major trouble "which is weakening demand global, so it's not just a supply thing—it's a demand thing overseas."
Stocks have run into a bit of trouble lately, as the S&P 500 is down 2.5 percent from the record high it hit on Sept. 19, and the CBOE Volatility Index (better known as the VIX) has gotten as high as 17. But Scott Clemons, chief investment strategist at Brown Brothers Harriman Private Bank, predicts that it will get much worse for stocks between now and the end of the year.
"I'm nervous," Clemons said Tuesday on CNBC's "Futures Now." "I think investors have had a holiday from volatility for almost two years, and that vacation's about over."
Because the markets have been so sanguine for so long, when the market does crack, the reaction could be swift and painful, he said.
"The complacency in the market, to me, is one of the things that creates a fragility that could lead to an enhanced or exaggerated negative market reaction, on even a modest piece of negative news."
On a wretched day for stocks, the CBOE Volatility Index (or the VIX) jumped 22 percent on Thursday, which likely indicates that investors are growing increasingly concerned about the market's next move. And if fears on Wall Street are correct, then stocks may suffer through an especially difficult few weeks.
"After a long and low period of implied volatility across the board, you are seeing some realization that maybe it is time to buy volatility and maybe get more conscious on risk assets like stocks," said Nicholas Colas, chief market strategist at ConvergEx, on CNBC's "Futures Now." "Clearly there has been a rising level of concern among institutional investors about the market feeling toppy. We've heard that from our clients, and we've seen it from the action on our trading and options desks."
He said that seasonal trends point strongly to a spooky October.
"Right now the VIX high for the year was in February: 21.44 on February 3. If you go back 25 years to the beginning of the VIX, it's never topped out in February. October is typically a very high volatility month," Colas said on Thursday.
"I do expect that we get a pullback that rolls through the first half of October. It's seasonally right. We've had a lot of complacency. There are enough headlines to concern people. And let's face it—stocks may not be expensive, but they're not cheap either," he continued.
Gold bulls breathed a sigh of relief on Tuesday, as the metal rose on the session, and managed to avoid hitting a fresh eight-month low (which has become a common occurrence for gold over the past week). But according to commodities expert Andy Hecht, gold is set to head much lower in the weeks ahead.
"Right now, my best trade is just being short gold," said Hecht, a longtime veteran of the Phillip Brothers trading desk, and the author of "How to Make Money with Commodities." "I think that we're going to go through the $1,185 support which was the low on December 31st of 2013, and I think we're going to head to four-year lows, which will bring gold to around $1,045" per troy ounce.
Hecht points out that many precious metals are already trading at four-year lows, including gold's "little sister," silver, which lost as much as 6.5 percent in two sessions on Friday and Monday before staging a mild recovery. In fact, Hecht looks to the ratio between the price of gold and the price of silver in predicting that gold is set to slide further.
"Gold has been moving lower, but it's been getting more expensive when it's moving lower," Hecht said Tuesday on CNBC's "Futures Now." "And that reason for that is the gold/silver ratio. It's at four-year highs at 68.7-to-1. The median level that I like to look at in that relationship is 55-to-1. That's kind of where it is over the last 35 years, where it's mean-reverted."
Now that the ratio is so far above its historical average, "that tells me that silver is either cheap, or gold is expensive. And given the fact that silver broke down through the $18 to $18.50 support on Friday, it's telling me that gold is just too expensive here relative to silver."
CNBC's "Futures Now" team is very sad to report that Rich Ilczyszyn died Saturday at age 46.
Rich was a valued contributor to "Futures Now," where his wit, energy and intelligence made him an integral part of the team. More importantly, Rich was a truly kind and decent individual, and a family man through and through.
As executive producer of "Futures Now," I take enormous pride not only in having worked with him, but also in being able to have called him a friend.
The family said the apparent cause of death was a pulmonary embolism, Rich's colleague at iiTrader Bill Baruch said on Tuesday.
He is survived by his wife, Kelly, daughters Sydney and Hannah, and son Logan.
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