RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

**Monday: ISM Manufacturing PMI slows to 50.9 vs 52.5 previous

**Tuesday: JOLTs shows a decline in job openings by -1.2M

**30yr Mortgage rates jump to 6.75%

**Wednesday: OPEC + cuts Oil production by 2M bbl/day

**US ISM Services Index declines to 56.7

**Friday: US Non-Farm Payrolls report shows and increase in jobs in Sept of 263K vs 250K Expected. 

**Friday: US Unemployment rate declines to 3.5% vs 3.7% previous

Equity market started out on positive footing coming into Q4’22, with an increase between Monday and Tuesday of nearly +5.00% in the SP500.  But hopes of a continued rally quickly began to fade in the back half of the week.  The SP500 was able to piece together a positive return of +1.28% w/w, but was certainly overshadowed by Friday’s decline of -2.78% (-3.83% Nasdaq, -3.00% Small Caps) following the release of the Sept NFP report on Friday.  The highlight of the week was perhaps the announcement of the notable cut to OPEC + Oil production by 2 million barrels per day.  Oil prices gained +16% w/w. 

Other Notable Market Performance:

Gold +1.82% w/w

Silver +5.68% w/w

Copper -1.00% w/w

Oil +16% w/w

RBOB +11% w/w

Nat Gas -1.45% w/w

Week of Oct 10th:

This week will be highlighted by the September Producer Price Index (PPI) Wednesday, and of course the Consumer Price Index (CPI) on Thursday.  CPI expectations are as follows:

Core CPI m/m +0.5%

Core CPI y/y 6.5%

CPI m/m +0.2%

CPI y/y 8.1%

The last reading of CPI in September showed a noticeable increase in the y/y Core number – jumping to 6.5%, a new high.  We have also recently seen an uptick in the PCE Index to 4.9%, up from 4.6% previously.  We’ve no reason to believe we should see any substantial “cooling” of inflation expectations in this weeks reports, but as always we remain flexible with regards to our market positioning and analysis. 

Market Analysis/Commentary for Oct 10th

SP500:  The 3-6 month trend remains BEARISH, momentum remains NEGATIVE, and our proprietary Overbought/Oversold (OB/OS) remains neutral.  Early in the week of Oct 4th, there was a narrative spreading through the market that the Fed was likely close to a “pivot”.  Narrative investing/trading is emotional and toxic, and we urge our traders to stay away from that low level of thinking.  The bull case for stocks at the moment is minimal, and solely rests on the idea that the Fed will take its foot off of the “economic brake”.  The economy is slowing at an egregiously rapid pace, the real estate market appears to be on the brink of a “full stop”, noticeable slowing in manufacturing, and services, earnings forecasts are also likely to be revised lower from here – the bull case is scant at the moment.   While we do recognize that a Fed “pause” will ultimately happen, and the stock market may enjoy some respite because of it, our cycle call of “risk-off” will remain in place until the Fed begins to signal it first rate CUT, which we have forecasted around mid-year 2023.  Until then, rally’s in markets should be sold.

While we’ve been recommending short sales on the SP500 for the better part of 2022 to our clients, including this past week, I do however think that we will see an attempted rally perhaps over the next 1 to few weeks as the mid-term elections draw closer.  Some of the indicators we’ll be watching will be Put/Call ratios, IVOL premiums vs discounts, and our classic OB/OS and momentum signals.  Keep your head on a swivel out there. 

Bonds/Yields:  10yr Notes profile remains bearish trend, negative momentum, and neutral OB/OS signal.  I’m becoming concerned about bond market liquidity, and if there were a reason for the Fed to “pause”, it may be due to this fact.  The bond market has not been able to replace the Fed with another buyer of such magnitude.  No recommendation here at the moment. 

Oil:  remains Bearish trend, momentum has been upgraded from negative at the beginning of the week to positive, and remains Immediate-term OB.  Oil has me interested in the long side for a “trade”, but remain bearish trend in our longer-term analysis of this market.  The fundamentals are overwhelmingly bullish, however the broader macro cycle risk remains a deterrent.  We’re going to find out if Oil deviates from cycle risk (demand) from here. 

Gold:  I’m paying attention here.  While ultimately we “want” to be bulls on Gold, the trend remains Neutral (upgraded from bearish at the beginning of last week), and its not giving me too many convincing reasons (technically) to want to buy Gold for anything more than a short-term trade.  I’m paying attention here (as in Silver), and recognize that the reasons to own Gold here are vast, but would rather see my quantitative signal turn bullish and confirm our fundamental reasons. 

Bonus:  Nat Gas may be in a near-term bottoming process, be on the look out for higher Nat Gas prices over the near to intermediate-term as it consolidates around the 200 dma.  Risk parameters are 6.30 on the downside vs upside targets to 7.85-8.15.  For more on this feel free to reach out. 

Complimentary:

Market Trend > 6 mo Range Low Range High Momentum OB/OS
           
SP500 Bearish 3532 3799 Negative 37
Nasdaq 100 Bearish 10,809 11,673 Negative 32
Russell 2000 Bearish 1621 1759 Negative 40
10yr Yield Bullish 3.64% 3.99% Positive 59
VIX Bullish 28.81 33.69 Positive 40
Oil Nov Bearish 81.26 93.48 Positive 99
Gold Neutral 1628 1733 Neutral 48
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John Caruso

Senior Market Strategist
Follow John on Twitter @JCarusoRJO. John began his career at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. John made his move to the commodity industry at the end of 2005, and began his path at Lind Waldock, at the time the largest retail brokerage division worldwide. John did his undergraduate work at Robert Morris University in Pennsylvania from 1999-2003, where he was a 4 year varsity basketball letterman.  A self-professed “Macro Trader”, John uses a multi-factor fundamental and “quantamental” trading model in distinguishing market cycles based upon the accelerations or decelerations of growth and inflation metrics. His technical and quantitative approach is heavily reliant upon trend and market range analysis via a custom built standard deviation system in helping him make probability-based market decisions. John is an avid reader of all things pertaining to finance, and behavioral economics. Click here to sign-up for John Caruso's Trading Coach Insights. Daily information and insight on all futures marketsin ranging from metals to equities.
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