Futures Market Insight w/John Caruso - 10/24/2018

October 24, 2018 7:33AM CDT

Bull and Bear Market

Equity futures were red for the bulk of last night's trade, but are starting to recover in the 7AM hour.  I’d expect a bounce in the next few sessions towards 2785 in the S&P 500 futures. One thing I’d like to address today is earnings reports – w/ about 20% of the S&P 500 reported (91/500) – we’re seeing earnings growth rate at 20.9% y/y currently vs Q2 at 25.3% y/y and Q1 at 26% y/y – which was a record growth rate in Q1.  At first look, you're saying to yourself that 20.9 is a strong earnings growth rate, and you’d be correct, however what we’re focused on (if your doing macro correctly), is whether we’re accelerating (getting better) or decelerating (getting worse).  From Q1, thru Q3 we’re seeing a rate of change growth slowdown. We’ll continue to monitor this as more EPS reports hit the board throughout Q3. 

All around the world:
China +0.33%
Japan -0.38%
Germany +0.93%
US -0.04% (sp500) and + 0.07% (Nasdaq)

Oil- is rebounding from it’s bludgeoning yesterday – hanging right around last month's lows at 66.80 +0.56%.  The Saudi’s are in “pump mode” – their words not mine – and it’s likely a deal struck by the Trump administration and Bin Salman, following the murder of Washington Post journalist Khashoggi, and ahead of the US mid-terms and Iranian economic sanctions.  We have been alarmed at the rate of this decline, and believe we’ll likely bounce and retest $70.00 again into y/e – but we remain bearish on oil's rally back to the top of our respective trading range. 

Gold- sliding on more strong U.S. Dollar – we maintain that the USD rally is likely in the proverbial 11th hour – We’ll look for anything out of the ECB tomorrow that suggests a pivot in the USD vs Global Currencies.  The Japanese Yen and British Pound may actually be the best places to be in the currency space moving fwd – not there yet however. 

Bonds: we’ve had trouble holding rallies in fixed income, but we maintain that this price action is likely a bottoming process….remember: bonds have been going down (rates up) for 3 years now, and with the U.S. likely “past peak” in the economic cycle, we believe the Fed is also “past peak” with it’s interest rate tightening cycle.  Stay long here. 

Tomorrow we have an ECB meeting and we’ll try to bring you the highlights of that meeting tomorrow. 
Today: New Home Sales and a host of Fed speakers
Thurs: ECB, Durable Goods, Trade, and Jobless Claims
Friday: Q3 GDP (1st est), and Consumer Sentiment

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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