Futures Now Futures Now: Blog

• Futures Now
• Tutorials
• Blog
• Videos
• Jackie DeAngelis
• Disclaimer

A million barrels of oil doesn't buy much good will these days.

Oil markets got a temporary boost on Tuesday on reports that Saudi Arabia could cut its crude exports by a further 1 million barrels. It was the kind of news that could once sustain a session-long surge, but almost as quickly as futures popped, the rally fizzled.

U.S. crude prices then spent much of the session bumping around barely positive territory, eventually grinding 38 cents higher to settle at $46.40 — comfortably within the $10 range the contract has traded in for nearly three months.

WTI crude was just 23 cents higher to $46.82 midmorning Wednesday New York.

U.S. West Texas Intermediate crude

On its face, the report was exactly what the market has been awaiting. Despite OPEC's deal to cut the number of barrels it produces, exports haven't fallen in lockstep. So while Saudi Arabia and its cohort are pumping less oil, much of it is still finding its way to foreign storage tanks, undermining the cartel's goal of shrinking huge global stockpiles.

The message from the market is clear, say analysts: show me the barrels.

"You'd really have to prove it to them. They've seen mixed signals," said Tom Kloza, global head of energy analysis at Oil Price Information Service.

The potential export cut basically balanced out an earlier report that Saudi Arabia's production rose in June, Anthony Grisanti, founder of GRZ Energy, told CNBC's "Futures Now" on Tuesday.

Last week, Saudi Arabia reported it had slightly exceeded the production cap it agreed to last winter, when exporters struck a deal to cut their combined output by 1.8 million barrels a day.

Before that, tanker tracking firms said Saudi crude export loadings spiked in June after a long-awaited plunge in April. Around the same the exports rebounded, reports emerged that Riyadh was cutting shipments to U.S. ports and paring back August exports by 600,000 barrels a day to the lowest levels this year.

This year has been one of the quietest on record for the markets in terms of big and swift moves. Yet if history is an indication, volatility could soon rear its ugly head.

According to LPL Financial's Ryan Detrick, the CBOE Volatility Index, or VIX, has averaged a reading of 11.54 in 2017—its lowest ever. This as the S&P 500 Index hasn't seen a 5 percent pullback in over a year, its longest streak without such a decline in more than twenty years.

"This is only the sixth time since 1950 that the S&P 500 has made it at least a year without so much as a 5 percent correction, and marks the longest streak since 1995," Detrick explained.

Despite stocks hitting new record highs this week, the technician is skeptical that this trend will continue. Blue chip stocks "can go a little bit further without a 5 percent correction, maybe, but when you consider the calendar, we've got August and September, [there are] troublesome months coming up here," he toldCNBC's "Futures Now." last week.

"The odds of going the full year without a 5 percent correction are extremely slim," he added.

In fact, Detrick's historical charts show that since 1950, there has been a 5 percent pullback in the market in 91 percent of years from then until now. Still, even though most years do see a correction, Detrick said that investors should actually buy the dip if it occurs.

First, optimistic expectations for earnings have Detrick believing that economic outlook is positive. Wall Street analysts are expecting earnings growth of between 6 and 7 percent for the quarter.

Secondly, history also reveals that given the S&P's gains made in the first half of the year, the market could actually be due for another rally in the remaining half of 2017.

According to Detrick, since 1950, whenever the S&P 500 has rallied over 8 percent in the first half of the year, 84 percent of the time it has also rallied by about 4 to 5 percent in the second half of the year.

Given that the S&P is currently up over 9 percent year to date, statistically the index could be headed for more record highs by the end of 2017.

Gold could be the next asset to break out.

Michael Dudas, a Wall Street analyst who has followed precious metals and miners for decades, predicts gold is on the cusp of recovering its losses.

"I think this is a good time to get back into the mill," the Vertical Research analyst said Tuesday on CNBC's "Futures Now." "I think we can see a nice move in gold here over the next three months. I think by year's end we could be above $1,300" an ounce.

Dudas is making the case that gold prices will reach $1,350 in six months. If that forecast is right, that would translate into a 10 percent gain from current levels.

"We can find the bottom here around $1,205-$1,210. I think the $1,240- $1,245 level is not unreasonable," added Dudas. "I think in the near term, we do have a nice little bounce and reversal here."

Gold has been trading around four month lows. But it did eke out a slight gain of 0.12 percent to settle at $1,214 an ounce on Tuesday. On Wednesday, it was up $2.

"On days when FANG [Facebook, Amazon, Netflix and Google parent Alphabet] and the markets are making new highs, certainly gold can get stuck a little bit," he said.

Dudas also makes a fundamental case that gold prices will strengthen. He believes inflation expectations will pick up and exceed nominal interest rates.

"I think that's a big support level for gold as a commodity," he said. "The level of accommodation, even if we see another 25 basis points, is still going to be quite real in the marketplace."

He also says seasonal factors bode well for gold, and he sees some supply and demand factors as bullish signs longer term.

"Mine supply out of global miners is heading downward. We're going to see a 5 to 15 percent decline in gold supply over the next years because of the bear market and lack of capital spending," Dudas said. "I think it's going to be much more difficult to access gold in the future as we have less coming to the marketplace and more of that gold going into the eastern markets."

The analyst who accurately called 2015's crude collapse is making a new prediction.

Tom Kloza of the Oil Price Information Service suspects the oil market will heat up this summer. Then, it will do something that could cost traders a lot of money.

"I do think this is a summer of sizzle," Kloza told "Futures Now" recently. "Here in the summer with very, very high usage of gasoline, diesel, jet fuel — you name it. I think it'll prop up crude oil. The problem comes with the fall fizzle."

He argued that demand is rising right now for the commodity, as more consumers spend money on travel and vacations.

But as of Friday's close, it doesn't seem to be reflected in the market. Crude fell by 2.8 percent, closing at $44.23 a barrel. The day's activity was driven by concerns that U.S. output is too high, and OPEC exports are climbing.

Kloza's comments also come just a few days after the AAA, which uses his firm's data, found the average price nationally for unleaded dropped to the lowest level so far this year: $2.23 a gallon.

As the summer progresses, Kloza predicted WTI (West Texas Intermediate) crude oil's range will be between $42 and $50 a barrel, and that will bring prices at the pump higher.

"You have to worry when you get into August and the closer you get to the [fall] equinox. That's when I think you run into real problems with crude," cautioned Kloza. "I'd be a seller when it gets closer to $50 on WTI and maybe $52 on Brent."

By autumn, Kloza forecasts, refineries will run less and more oil will be coming online from the Permian Basin in North America. Those are the catalysts to help push crude prices lower.

While traders may suffer, it could spell relief at the fuel pumps for consumers.

"We think that oil will be lower in the first quarter of 2018 compared to the third quarter of 2017," Kloza added.

Veteran technician Ralph Acampora has an ominous warning for investors: Beware the split market.

According to Altaira Capital Partners' director of technical research, as stocks continue to make new all-time highs, there's actually a divide. The dynamic has actually "split" the market and may give investors an overly bullish impression, Acampora told CNBC recently.

"If you took a snapshot of [the major market indexes] right now, you'd say the trends are fairly strong towards the upside and I totally agree," he said on CNBC's "Futures Now" this week.

"However, if you look below the surface [at] another popular average like the Dow Jones Utility Index, you'll see that that's not doing as well," the analyst added.

In fact, while the Dow Utilities Index is still up more than 6 percent year to date, it has actually sunk almost 4 percent over the past month alone. During the same month, while the S&P 500 Index struggled to break out, it did maintain the same levels.

Acampora, dubbed by some market watchers as the "godfather of the charts," saw particular trouble with the S&P, however. He believes 6 of its 11 sectors are "rolling over" in a way that should give investors pause.

"So, I call it a split market and I caution everybody: Be invested, but be very, very selective," he said.

However, if investors were still looking to buy and get into the market, Acampora suggested that financials, health care and industrials would be the groups he would look at. All three of those groups are "holding up well" in the split market.

Oil prices plunged 4 percent on Wednesday, ending the longest bullish streak in five years, as more evidence indicated OPEC exports rose last month.

U.S. West Texas Intermediate crude futures ended the session down $1.94, or 4.1 percent, at $45.13 per barrel, erasing much of the previous two sessions' gains. International benchmark Brent crude futures slumped $1.85, or 3.7 percent, to trade at $47.76 per barrel 2:37 p.m. ET.

WTI prices rose nearly 11 percent from a 10-month closing low over the course of eight sessions, the contract's longest winning streak since 2012.

"We're in no man's land as this tug of war of this rebalancing act continues to play out," Jeff Kilburg, founder and CEO at KKM Financial, told CNBC's "Futures Now." He said he expects U.S. crude prices to remain stuck in a range of $42 to $47 a barrel.

WTI crude futures, source: Factset

Bearish sentiment crept back into the market on Wednesday after data from Thomson Reuters Oil Research showed OPEC's exports rose in June. This was despite the producer group reaching an agreement in May to extend a deal to keep 1.8 million barrels a day off the market in order to shrink global supplies and end a three-year glut.

OPEC exported 25.92 million barrels per day in June, up 450,000 bpd from May and 1.9 million bpd more than a year earlier, according to Reuters data.

CNBC reported last week that shipments from top oil exporter Saudi Arabia and other OPEC members were on the rise in June, citing analysis by tanker tracking firm ClipperData.

OPEC and other oil exporters including Russia have entered a seventh month of production cuts, but analysts remain concerned that exports have not fallen as quickly as output this year.

"Everyone continues to fight for market share and not necessarily constrain supply to the global market, and that realization I think has registered today," said John Kilduff, founding partner at energy hedge fund Again Capital.

Saudi Arabian state oil giant Saudi Aramco on Wednesday said it would cut prices for light crude grades to customers in Asia in August, a sign of rising competition in the key demand hub.

"That indicates that the production scheme is just not helping prices," Scott Nations, chief investment officer at NationsShares, told "Futures Now."

A report that Russia has ruled out deeper production cuts also weighed on markets, Nations said. Russia is the largest non-OPEC contributor to the output cut deal.

Some analysts on Wednesday said oil prices were poised for a fall after the sharp rise through Monday. They said the surge was driven by traders closing out short positions, or bets that oil prices would fall.

"We had a frothy move higher driven by short covering as negative bets had gotten nearly as high as they had been when oil was at its lows last year, so we were bound to see a bit of a reversal with traders taking profits ahead of tomorrow's inventory report," Tamar Essner, director, of energy and utilities at Nasdaq Corporate Solutions, told CNBC in an email.

Traders are awaiting the latest data on U.S. crude stockpiles on Thursday, which are delayed by one day due to the July 4 holiday. Analysts expect stocks to fall by 2.8 million barrels, according to a Reuters survey.

A painful correction is coming and there's little that can be done to prevent it, according to former Republican congressman and libertarian firebrand Ron Paul.

Speaking to CNBC last week, the former GOP presidential contender argued the economy is not as strong as Wall Street consensus believes, and the situation could turn ugly as soon as October.

"If our markets are down 25 percent and gold is up 50 percent it wouldn't be a total shock to me," said Paul recently on "Futures Now."

That scenario would drag the S&P 500 Index as low as 1,819, and gold as high as $1,867 an ounce from current levels.

Paul, who's also a medical doctor and former U.S. Representative from Texas, is a well-known bear who has been sharply critical of Trump administration. He has also been putting a lot of blame on the Federal Reserve for keeping interest rates historically low for so long.

Although the Fed is undertaking a rate hike campaign after nearly a decade of ultra-accomodative monetary policy, some believe asset prices—and the economy—could still react badly.

"I think it's a very precarious market, and the Fed better be very careful. Since they are incapable of knowing what to do, I don't expect much good to come out of anything they do," said Paul. "There are so many mistakes made out there that the correction is almost unlimited."

This is not the first time Paul has called for a pullback on "Futures Now."

He made a similar prediction almost exactly a year ago on June 28, 2016, almost exactly a year ago. Since then, the S&P 500 has ripped by 21 percent and the Dow is up 24 percent, breaking several records along the way. The tech heavy Nasdaq bounced into record territory over that time period, and soared 34 percent.

However, Paul still makes the case that the rally is on borrowed time.

"People have been convinced that everything is wonderful right now and that stocks are going to go up forever," Paul said.

"I don't happen to buy this. The old rules always exist, and there's too much debt and too much mal-investment. The adjustment will have to come," he added.

The market has had a quiet start to the summer, but the doldrums may be about to give way to some serious fireworks, with new record highs potentially on the way.

So said Stephen Suttmeier, a chief equity technical strategist with Bank of America Merrill Lynch. Last July, Suttmeier identified a "very rare" signal in the markets that he said would bring the S&P 500 Index through 2,400.

This time, he's calling for the S&P to reach 2,500 or even higher, a 3 percent rally from Friday's levels. And it's all going to happen this month, according to the charts.

"We're right into support right now at around 2,418 to the 2,400 level," he said last week on CNBC's "Futures Now." He added: "I think that if we can hold that, we can see a move towards 2,475 and maybe even 2,500 or 2,550 in July."

Suttmeier noted the rally should come as no surprise as data going back to 1928 has shown that the markets typically sees an average gain of 1.5 percent in July.

"I would only start to get nervous if the S&P got below 2,400," he mentioned. "It would probably get quickly oversold somewhere north of 2,500 or 2,550, but I think we're re-testing the breakout point right here right now. That call into 2,500-plus in July remains intact."

Despite falling below its 50-day moving average on Thursday, the S&P 500 is still on pace for its 7^th straight positive quarter. A big contributor to the market rally in June has been the financials, with the sector having its best month since November.

Spring wheat futures soared more than 3 percent on Friday as drought worsened in a key growing region.

"Wheat conditions are at some of the lowest ratings in over a decade," said James Cordier, president and head trader at Optionsellers.com in Tampa, Florida.

A major drought in the Dakotas has caused spring wheat crop conditions to decline sharply in the past four weeks. That has lowered expectations for the spring wheat, a high protein grain used in artisan wheat foods like hearth breads, rolls and even pizza crust.

The U.S. Drought Monitor said Thursday that "much needed rainfall was unfortunately scarce over the [High Plains] region during the past week" and noted that a heat wave caused conditions to worsen in many areas. The monitor also showed "extreme drought" conditions expanding across the Dakotas and into Montana, which last year was the nation's third-highest state for planted wheat acres.

"Wheat conditions in the United States started deteriorating in May and the beginning of June, and that began the rally," said Cordier. "The chance for wheat conditions to improve in July and August seem very slim."

July hard red spring wheat, which is traded on the Minneapolis Grain Exchange, rose about 3.6 percent on Friday, a day after surging 5 percent. The contract is sitting at a three-year high and soared 34 percent in June, posting its best monthly gain since 2010.

The Chicago-traded July soft white winter wheat, meanwhile, jumped more than 6 percent on Friday and crossed above $5 per bushel for the first time in a year. For the week, the wheat contract was up 11 percent.

"We've seen the small speculators coming in and buying Chicago wheat," said Ted Seifried, chief marketing strategist with the Zaner Group in Chicago. "You also had a fairly large fund short position there, which they're starting to cover a bit more aggressively now that we've broken out to the upside on the chart."

A new crop progress report is scheduled for release Monday by the U.S. Department of Agriculture and could be another catalyst for higher prices, traders said.

"We'll probably [see] conditions deteriorate again on Monday," said Cordier. "So then the market rallies a little more next week. But Thursday and Friday you probably might look to take profits on it."

According to the June 26 USDA report, the ratings for spring wheat crop conditions were worse than analysts expected.

"Spring wheat crop conditions have dropped about 40 percent in the last four weeks," said Seifried. "The crop is burning up and it's not going to produce anywhere near what we were expecting."

Still, Seifried said the fundamentals on wheat are still "pretty bearish from a global scale on Chicago wheat and even Kansas City wheat for that matter."

Indeed, there's still a big carry-over of unsold wheat from previous harvests, with the vast majority of it Chicago wheat, according to Seifried.

"Our carry-over is about half of what we plan to grow next year," he said. "So we have about 50 percent of a normal crop in waiting just sitting there."

By comparison, Seifried said there's "just not a whole lot of very good quality wheat like the Minneapolis spring wheat. That wheat can really gain value very, very quickly and might have more upside potential."

Wheat is the nation's third-largest crop, after corn and soybeans, and globally ranks as the second-most used crop for food, after rice.

Spring wheat gets planted in April and May in the U.S. and typically harvested in August and September. The crop is most vulnerable to stress during its pollination stage in June and July.

Clearly, the continued ongoing drought conditions could represent further downside risk to yields at harvest. And experts don't see any let-up in the unfavorable conditions.

"The heat continues to build across the nation's midsection, and the prospects for rainfall across the drought areas of the Dakotas and Montana do not look very good over the next two weeks," said Brad Rippey, a meteorologist at the USDA. In addition to above-normal temperatures, he said the outlook also is for below-normal rainfall for the next few weeks.

The Nasdaq 100 broke a historical win streak, and according to one technical analyst, investors may have to brace themselves for a possible correction.

Tuesday on CNBC's "Futures Now," Pension Partners' director of research, Charlie Bilello, pointed out that the Nasdaq 100 had been trading above its 50-day moving average for 138 consecutive trading days, which is the index's longest win streak above that trend line ever. But Bilello also mentioned that it didn't change the fact that "some signs of potential weakness" were creeping up in the market.

"We're looking at things like the yield curve aggressively flattening, we're looking at inflation expectations falling and we're starting to see some weakness in the credit markets," he said. "Within the Nasdaq 100 we're seeing the semiconductor stocks, which have been the leaders for a long time now, starting to weaken."

At Tuesday's close, it seemed that some of those signs played out and dragged the Nasdaq 100 below that 50-day moving average, breaking the streak. Later that day, Bilello put out a note detailing what usually occurs when such a streak in the index breaks.

"Most of the time, there's a pullback or correction, which is followed shortly thereafter by new highs," he wrote. "We saw this in 2011, 2003, 2014, 2006, and 2007. In 2005, a deeper correction ensued which took some time (11 months) to reach new highs again."

In other words, it's likely that a correction is coming, though Bilello thinks the time frame for that is unclear. But history also suggests that the correction will likely be followed by new highs.

The Nasdaq 100 rebounded and opened higher on Wednesday morning, and the index is still up 14 percent year to date. But the Nasdaq 100 is still tracking for its first losing month since October.