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October 2013 marked the five-year anniversary of the "credit crisis," and the markets have come a long way since September of 2008. As of today's open, the S&P is up over 29% on the year, but the days of low rates and cheap money may be coming to an end.

Rates have stayed low for the longest period of time in over 50 years, but they won't stay that way forever. Despite the strong performance in 2013, the list of concerns overshadowing the markets in the coming year is daunting.

Throughout 2013 the markets were constantly battered by government shutdown, the constant beating of the drums for the Fed's taper and debt ceiling debates, but at the end of the day none of that prevented the S&P from making 45 separate new highs during the year.

Room on the downside for treasuries

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While most talking heads are still saying that rates will stay low for an extended period of time, we don't think that's true. It was low rates that fueled the bull market; higher rates will have a cooling effect on the stock market.

As the Fed continues to taper its asset purchase program, we expect rates to continue to rise. We do not think the Fed is in a hurry, but if it does indeed plan on "seven tapers over the next seven meetings," rates will go up whether the Fed likes it or not.

The increase won't happen in a rush and it will be data-dependent. Nevertheless, there is little reason to assume it won't happen.

When I was in bonds they traded 98.00 to 128.00 and eventually up to 133.00. This year's contract high came in just over 134.00, meaning there is a lot more room on the downside.

S&P bullishness will get tested in 2014

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We do not think 2014 will see the gains 2013 did. That said, we are also not as bearish as many other people are. As the Fed continues to taper in 2014 and the liquidity starts to dry up, that is when we will get a clearer look at what the S&P 500 is made of. It's our guess that at some point a low will be made and the S&P will continue its march higher.

The Asian markets closed mostly higher and in Europe 7 of 12 markets are trading higher. Today's economic calendar starts out with the Redbook, S&P Case Shiller and Chicago PMI.

As 2013 comes to close, the Dow, S&P and NASDAQ may have given investors record returns in 2013, but we do not think 2014 will go as smoothly.

For those of you that were lucky enough to catch the move, our hat is off to you, but as a permabull I fully expect some big ups and downs in the new year and if I were long I would be looking to take some of those profits. I'll leave it at that..

Our view

The fat lady may not have sung yet, but that doesn't mean she won't. It was more than five months ago that everyone was saying things really looked like 1987 or 1999-2000 and what about all the BS about a Hindenburg-style crash?

We can't forget about all that stupidity, but 2014 is not going to be "just like" 2013. As the Fed tapers, we will get to see what the markets are made of.

As for today, the last trading day of 2013, we think the S&P makes another all-time contract high!

As always, please don't forget the 10-handle rule and use stops…

  • In Asia, 7 of 11 markets closed higher: Shanghai Comp. +0.88%, Hang Seng +0.26%, Nikkei +0.69%
  • In Europe 7 out of 12 markets are trading higher: DAX -0.39%, FTSE +0.30%
  • Morning headline: "Best Year for the Stock Market Since 1997"
  • Total volume: LOW 567k ESH and 6.9k SPH traded
  • Economic calendar: Redbook, S&P Case Shiller, Chicago PMI
    • E-mini S&P 500 1838.25+3.50 - +0.19%
    • Crude 98.55-0.22 - -0.22%
    • Shanghai Composite 0.00N/A - N/A
    • Hang Seng 23306.391+61.521 - +0.26%
    • Nikkei 225 16291.31+112.369 - +0.69%
    • DAX 9552.16-37.229 - -0.39%
    • FTSE 100 6749.09+17.82 - +0.26%
    • Euro 1.3775
Source: It Ain't Over Till The Fat Lady Sings