The next move is likely “up”, and perhaps very aggressively.  Let me get that out of the way first, but do not let that fool you. We have a real problem. The problem lies within the Fed and them not taking action sooner, and now find themselves in a state of impotence. With CPI at 7% and oil and gas prices on a steep incline, the Fed has no choice but to follow through with the full taper and at least 1 rate hike. The caveat here with regards to rate hikes effectively staving off higher oil and gas prices is …. *drumroll* …. war with Russia. Our president on Wednesday essentially “Greenlighted” a Russian incursion….don’t believe me, rollback the tape. Sec. Blinken meets in Geneva with Russia, at which Russia will make demands, we won’t comply and we could be on the brink of a major conflict because of it. The Fed will stay their course until interest rates once again collapse, and if you’re not buying that, I don’t care – this is how it happens – the bond market knows, and it’s of our assessment the short end of the curve has or is very close to fully pricing in current Fed policy . So by the time the Fed lifts off with its first rate hike in March, I fully expect yields to be moving backwards by then. That’s it, that’s the real.

Yesterday we saw our 3rd weekly increase in US Jobless Claims, so we’ll be keeping a watchful eye on the Jan employment data come early Feb. – and so will the Fed.

Next Wed: FOMC Policy Meeting

That’s all I’ve got today,  we’ve given adequate warnings of Scenario 4 enough – now it’s playing out – Commodities are likely the next shoe to drop. 

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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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