The former OMB Director under President Reagan sees nothing but pain ahead for the stock market. » Read More
By: Keris Lahiff
A chorus of analysts has called the end of the 30-year bond bull market. Not so fast, says one trader. » Read More
"Let's make no mistake about it, tariffs are bad economic policy," BlackRock’s Terry Simpson says. » Read More
March's brutal start on Wall Street may not be an anomaly. » Read More
Tuesday's decline in major stock indexes was nothing more than a breather in the comeback rally, says Scott Redler of T3Live.com, and he has two charts to back up his argument.
Redler said the rally has put the S&P 500 above a few key technical indicators. He specifically pointed to the S&P 500's eight-day, 21-day, and 50-day moving averages, citing the index's rebound above those levels as a key sign of "power" in the market.
"We didn't get rejected. You went through the moving averages and actually reclaimed them," he said Tuesday on CNBC's "Futures Now."
The key here is that Redler saw previous resistance at around the 2,670 level, and the S&P managed to also break through that resistance. This also convinces Redler that the market could reclaim its previous highs by rebounding to the 2,880 area.
With Tuesday's pullback, Redler does believe that the market hit a resistance at 2,780, but that support is actually sitting at 2,730. The latter is the level at which the S&P broke above the three moving averages.
"We just hit a little resistance today around 2,780," he said. "I do think we could work our way back to the highs especially considering that tech's been very strong, the banks are strong. We just don't want to see those yields on the 10-year get too much above 3 percent."
The S&P closed at 2,744.28 on Tuesday.
While Wall Street braces for 10-Year Treasury yields to tick over 3 percent, one bond expert believes that will feel like a piece of cake compared to what may come next.
Sit Investment Associates' Bryce Doty believes investors are in "denial" over how high rates could go this year and the painful impact it could have on stocks.
"We didn't pierce 3 percent this time, but the next 10-Year auction in a couple of weeks is probably certain to do that," he said recently on CNBC's "Futures Now." "I think it's going to just keep going. 10, 20 basis points a month gets you to 4 percent in a hurry."
"Typically, the stock market has sold off and has created a flight to quality and has driven yields down," he added.
"Everything has changed. You now have the stock market reacting to an uptick in yields and bonds rather than the other way around," Doty stated. "So, I think it's going to take investors a while to re-calibrate that reality."
Doty, a senior portfolio manager at Sit, runs the RISE ETF, which is designed to profit from rising rates. His strategy right now is to short bond futures in order to "turn the fear into cheap insurance."
Doty calls the environment "surreal" — pointing to the Federal Reserve's intention to keep unwinding a $14 trillion dollar trade. It comes as debt issuance builds to cover exploding budget deficits, sparked by a combination of higher spending and new tax cuts that some analysts warn could make the problem worse.
"It's dangerous at worse, and uncertain at best," he said.
According to Doty, the Fed should have worked on clearing the balance sheet before risking getting too aggressive on raising interest rates. Now, it may be too late to prevent inflation from eating into companies' bottom lines.
Doty predicts the Fed will lift rates four times this year. That's one hike more than the Fed's official forecast.
"If they stop now, what kind of message does that send? It makes people think 'Oh, the economy is going into the tank.' But, no one believes that," Doty said. "So, then they lose credibility. It's a tough, tough corner they've painted themselves into."
Gold just had its worst week in over two months, but one technician says the precious metal is headed for a breakout.
The yellow metal is often used as a hedge against inflation; however, Carter Worth, Cornerstone Macro's head of technical analysis, argued that there is no reputable relationship between the two.
"It's ambiguous what [gold's] role is as a hedge against inflation, but the thought that it has to go down when rates are going up is not established in any way," Worth said this week on CNBC's "Futures Now."
On February 21st, the 10-year Treasury yield hit its highest level in four years, underscoring the jitters of some investors worried about rising prices.
"In fact, we know that since December, rates have moved on the 10-year from 2.35 percent to 2.95 percent, and gold is up about 10 percent," Worth added.
Furthermore, while looking at a 10-year chart of gold, Worth noted that there are several bullish technical patterns forming on the chart.
First, "you see there is tension that has been set up since the peak in 2011. You can call it a head-and-shoulders bottom of sorts," Worth said. A 'head-and-shoulders' pattern refers to when a stock makes a high, rallies to a higher high and declines back to the lower high.
"This is the beginning of an important move higher, even though we've already move quite nicely again from the lows of September," Worth explained.
Looking at the same chart, Worth noted that gold has also broken out of a wedge pattern. When there is a breakout from a wedge, technicians often look to that as a bullish sign of an upward trend. "That is also a very constructive set up on a technical basis," Worth said.
Finally, looking back 20 years, Worth compared the performance of gold to the S&P 500 Index, and S&P 500 total return. "What you see there is quite remarkable. Not only is gold beating the S&P on a 20-year basis, it's kept up with dividends reinvested…by my work, there's more to come on the upside," Worth said.
"I think [gold] will be at $1,400" by the end of the year, Worth added.
A fast-growing economy may be high on President Donald Trump's to-do list, but Cresset Wealth Advisors' Jack Ablin doesn't see it boding well for the market.
Ablin, the firm's chief investment officer, is worried the economy could soon overheat and drag stocks down by 10 to 15 percent from current levels.
Although they're "noble," Ablin says, the recently passed stimulus package and Trump's $1.5 trillion infrastructure plan could conceivably push economic growth over the edge.
"Trump and company are beating this 2 percent donkey into a 3 percent racehorse, and it's not going to last forever. It'll eventually start to absorb a lot of spare capacity, result in some inflation, and then start to turn the business cycle over sooner," he said Tuesday on CNBC's "Futures Now."
Ablin's comments came as the stock market failed to continue clawing its way back into the green from the February correction. The Dow and S&P 500 broke a six-day win streak and closed below their 50-day moving averages.
"The problem is that it's not fast enough for a lot of policymakers, and so what that means is now we're going to grow above potential," Ablin added. "That has the potential of raising interest rates, sucking a lot of that air out from under the premium that we have in the equity market."
Right now, the 10-Year Treasury yield is still trading within a fraction of 3 percent — a level Wall Street is watching very closely. If that rate jumps to 4 percent, Ablin predicts stocks will run into trouble because investors will see bonds as a safer bet.
"Since 2009, the bond market has been in this tug of war with the stock market with one arm tied behind its back," Ablin said. "As these central banks pull back from this pedal-to-the-metal policy, eventually bonds are going to be able to offer a fair fight against equities."
Bitcoin is back.
The cryptocurrency surged Tuesday, closing in on the $12,000 level. One bitcoin bull says progress on the regulatory front could send it even higher.
According to CNBC "Fast Money" trader Brian Kelly, Tuesday's rally is the result of more crypto-friendly attitudes by government regulators. Not only did Wyoming on Monday pass a bill relaxing securities law for some tokens, the South Korean government, which had previously vowed to crack down on cryptocurrency trading, said it would "support" and even "encourage" crypto operations so long as they were "normal" transactions.
"The sentiment has changed here, which to me is going to start bringing in more investors to the space," Kelly said Tuesday on CNBC's "Futures Now."
And if this softening of regulations brings investors into bitcoin, which Kelly believes it will, there could be even more buyers kicking in around the $12,000 level.
For those looking to make a trade, Kelly recommended buying March Cboe bitcoin futures at $12,000 with a target of $18,000. Since bitcoin futures are so volatile, he put a stop in at $10,000.
Cboe and CME bitcoin futures hit their highest levels since Jan. 29 in Tuesday's bitcoin rally, up 15 percent and 16 percent, respectively, for their best sessions since they began trading in December.
Bid farewell to the bond market bull run, because the markets are entering a phase not seen in 72 years: A rising rates cycle.
"The 36-year falling rates cycle, in our opinion, is over," Louise Yamada, managing director of Louise Yamada Technical Research Advisors, told CNBC's "Futures Now" on Thursday.
Since hitting an all-time of 15.84 percent in September 1981, the yield on the U.S. 10-year has been steadily declining. Yields hit lows of 1.36 percent in July 2016. Since then, however, it appears the downtrend has broken, says Yamada.
The next test for yields will be the 3 percent level. At that point, it will have been confirmed technically that the yields have hit a floor, and that a new rising rate cycle is in place, says Yamada.
"We're looking for 3 percent to be crossed and that will, from a long-term perspective, define the initiation of a new rising rate cycle which we haven't seen since 1946," said Yamada.
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