RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Good morning,

Out with April, in with May. Looks like we’ve got a little distribution happening this morning in equities, its about time we’d say to that. Likely profit taking into month end, hopefully opening up some long side entries over  the next few weeks. 

SPY -0.51%, NQ -0.64%, RTY -0.78%

My take on markets at present:

Europe: Europe looks mixed to higher following a host of European data released overnight.  Euro Zone Unemployment Rate fell to 8.1% vs from 8.2% previous and toppling expectations of a RISE of 8.3%.

GER GDP missed Q/Q, but beat expectations Y/Y, the same goes for SPAIN. 

European inflation data looks to be accelerating – which may begin to open up opportunities the Short the European Bond market as we think a rise in yields across the pond is likely coming over the next few months.  If you’re set up to trade on the EUREX, we may begin so soon. 

Energy: We’re getting some back and fill here today, we’re still interested in Oil, Heating Oil, Gasoline, and Natural Gas on the long side.  Natural Gas in particular has a much improved situation happening as we speak.  Natural Gas is rounding out the month +8.8%.  Still more upside we think over the next 2-3 months, we’ll look for long side entries within the range. 

Metals: The industrial metals continue to outperform the precious metals space.  Copper 4.52, showing few signs of fatigue and +13.5% for the month – $5.00 look to be in play, $4.26 looks like a favorable entry point if we can get some price distribution there. 

Silver looks ok for long side trade entries between here and 25.80 we think.  The chart remains in a consolidating phase (which leads me to believe it’ll likely be the last commodity to breakout, if at all of course), just lacking a good fundamental demand side story to help lift prices to 27.00 and beyond we think. 

Gold, doesn’t look good from a longer-term perspective, but holding 1760-1750 level which keeps 1800 in the cards for Gold.  We suppose if Silver can pull it together here, Gold should follow price action higher.  Still not a fan of Gold in the current cycle. 

Yields/Rates: Still look favorable for further asset price inflation.  Interest rates are struggling to find any traction higher (or lower) at the moment.  Just chopping around in a 15bps range for the 10yr yield.   

US Dollar: There’s a small pocket of the Dollar “doing better” in May we think. Price won’t likely get too far on the upside based on the Monthly chart view.  Interest rate markets don’t look favorably for a dollar rally at the moment. 

Stocks: We’ll likely wake up to a “scary” story for equity markets, that creates some selling over the next few weeks, and a move in the VIX to the low to mid 20s.  What that “narrative” will be, I’ve no idea.  The Monthly view of the SP500 is parabolic, so we’re due.  BUT, the Fed put is still in place.  Any downside we think will be brief in the near-term, and create long side entry opportunities.  There’s a bigger period of risk that happens out into mid-summer we think, which we’ve of course been saying Scenario 4 (Growth/Inflation Slowing) is likely in Q3. 

The 2 commodity related holdings in my PA are Silver and Nat Gas proxies – they may work, they may not, but….I’m holding because I don’t see any imminent threats of a breakdown in either markets at the present time. 

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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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