For the newcomers, this is what Scenario 4 Growth/Inflation slowing looks like….

Dollar up
Bonds up
Interest Rates down
Risk Assets down

We discussed the rising probability of the this set-up headed into Q4 2020 all of last week. While we still don’t fully know the answer to whether its Scen. 4 or Scen. 3 in Q4 – we’ll just keep going with our compilation of signals, both fundamentally and quantitatively.  The glue that’s holding everything together is the debasement of the US dollar. Last week the dollar was signaling higher lows, and a rising probability that it was going to stabilize here in the lower half of our range. That’s proving correct this morning. We’re within an economic backdrop of “when the dollar goes up, risk assets go down”. Why do you think Powell and Mnuchin are so desperate to devalue the “buck”. Hopefully after following us for several weeks, you’ll come to realize there’s a method to all this madness. Now I could go into a myriad of reasons listed by your mainstream financial sources as to why stocks are down this morning, the FinCEN Files, Tik Tok, Ruth Bader Ginsburg, COVID returning to the UK, etc – you can always point to something after the fact, but the bottom line is that there’s a rising probability of another Growth/Inflation slowing backdrop on a 1 and 2yr look back in Q4 2020. A mentor of mine once told me “do macro, before macro does you”.  

Global Equities
USA:   SP500 -1.86%, NQ -1.60%, Russell 2000 -2.64%

EUR: GER -3.26%, FRA -3.15%, UK -3.31%, SPA -3.01%, ITA -3.09% and I could keep going

ASIA: -0.63%, KOSPI -0.95%


*Oil -2.52% this morning.  I’m glad we went with the “signal” and didn’t cow tow to the threats issued to speculators from Saudi Oil Minister Bin Salman last week. 

*Gold -1.90% to 1924. Gold should hold up “better” than most hard assets within this backdrop, so stay tuned in for what we do next here. 

*Copper is holding up this morning, as 70% of demand comes from China – China remains in Scen 2, which those of you that know, is a much better economic backdrop. 

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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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