Futures Market Insight w/John Caruso - 10/18/2018

October 18, 2018 9:07AM CDT

Bull and Bear Market

Taking an early peak at the market you’ve got the Shanghai Index -2.8% overnight, now down -30% since January, my goodness. We see a small bounce in Germany overnight, nothing really noteworthy and still down -9.5% ytd. U.S. equities are off to a rough start pre-market– We signaled a “Sell” on the S&P 500 into yesterday’s close and according to our process we could see downside to the recent lows around 2700 and upside risk to 2835. Oil is getting smashed for the second straight session and now flirting with a “Bearish Trend” -  immediate term oversold w/ 68.50 the new low end and 72.50 on the high end of our range.  Sub 69 in oil is bearish trend and trade – a very bad look for oil prices. 

On the other side of the FOMC minutes yesterday, which were hawkish – No surprise here.  The Fed is likely to be hawkish into the Dec FOMC meeting – but we expect to hear a different tone from the Fed coming out of that meeting. In other words, we don’t think the Fed can get any more hawkish than what they are at the moment. On that note, we’ll be looking to add the 2-year and 5-year notes to our longer-term or “buy and hold” list of favorites moving forward. 

The dollar remains “king” in the currency space. The dollar as we’ve warned is a very “crowded” trade, and we’re no longer looking for buying opportunities here.  The dollar is holding its bullish pattern as the Q3 data is still being reported.  We do expect at some point in the 4th quarter that the dollar will begin to sniff out the slowing of the economic cycle ahead of slower growth/inflation data being reported.  This also plays into our “less hawkish” Fed theme following the December meeting. Hawkish Fed = bullish dollar; dovish or “less hawkish” Fed will be net negative for the dollar – and of course we believe the latter will happen. 

Quick market run down:

SP500- We’re bearish on rally’s in S&P 500 to 2830-2850 zone

Oil- No longer investable on the buy side in our estimation. The immediate term trend broke on 10/11 and the intermediate term trend this morning when we crossed 69.00. We’re bearish on rallies to 71-72.00 or until further notice with our client base.

Gold-  We’re bullish gold, but not from present levels.  Our sweet spot in Gold (as long as our longer term fundamentals still support it) is 1215-1200.  We’ll call that the accumulation zone for gold bulls. 

 

Feel free to reach out to John Caruso at jcaruso@rjofutures.com or 1-800-669-5354 if you’d like to get a 2 month free trial of our proprietary trade recommendations by email. 

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