RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

I rarely look at the Dow Jones, because quite frankly 30 stocks are NOT the market, but for crying out loud, look at the Dow.  It hardly so much as flinched during this last episodic moment of volatility in the NASDAQ and SP500.   Just an observation.  Sure, the tectonic plates may be shifting a bit underneath the market, but honestly, I’m not so sure just yet.  The SPY is a hair away from a new ATH as I’m drafting this note at about 9pm May 6th, we’ll see if this ages well by the morning.  

Volatility- it appears as if Vol is attempting to breakout into a higher “regime”.  We know, or think at least we think we know what may be coming in Q3 (July-Sept), and that’s Scenario 4 GROWTH/INFLATION SLOWING.  You’ll be the first to know when we go full-on bearish, I’ve never missed an opportunity to position short inside of a Scenario 4 set-up. 

Bonds/Yields- Clearly there’s been some intervention in this market, as inflation via rising commodity prices continue to make near decade highs, and bond yields sag.  It begs the question if the Fed is boxed in, being that they can’t allow rising yields nevertheless raise rates themselves, because they need to service the debt they’ve created via interest payments to the bond holders, but also want their cake too in the ability to stave off hyper-inflation.  I don’t know what the Fed (and Treasury) are attempting here, from Powell’s “we’re not even thinking about thinking about raising rates”, to Janet Yellen’s gaff on “we may need to raise rates to cool an overheating economy”.  What’s going on here?  I don’t know, but it’s starting to look like a fiasco.  They’ve created an environment where cash is trash, and you’re forced into riskier assets via stocks/commodities/Crypto to fend off inflation eating into savings. And then yesterday there was this: https://www.cnbc.com/2021/05/06/fed-warns-of-possible-significant-declines-in-stocks-as-valuations-climb.html .  Yields from my vantage point appear to be attempting to break down into a LOWER trading range (Bond prices into a higher range) –and of course we’ll see how this ages following this NFP Employment data this morning.  And I’m personally still short bonds/proxies myself – and this may end up being wrong, but I’ve been right on this market for a long time too.  Regardless, we think this would be a temporary development and that we’re on the brink of a multi-year bear market in the Bond market (bull market in rates), and this is likely to reignite into year end. 

Gold/Silver- Gold remains bearish trend, while Silver bullish.  It’s tough to chew on that, but from our quantitative signal, that’s the truth for now.  Gold should hit some stiff overhead resistance between here and 1850.  I said a week ago that Gold looked “Ok” so long as it held 1760-50 level, it could run to 1810-1820, and it was correct.  But, now we’ve reached those bear market rally targets we’ll get back on the sell side.  I was bullish of Gold from the end of 2018 until Nov. of 2020, I’ll be bullish again, just not now.  And, if we’re correct on Bonds entering a multi-year bear market, well we know Gold is not an asset you want to own in that environment.  Still think another smack down is coming in the Gold market.  If I end up being wrong on Gold, I’ll own up to it, and may actually call William Devane and Rosland Capital in between commercials on Fox. 

Gold Daily Chart (excuse my artwork) – simple fact is, I’m staring at an 8/9 month bear market….this is not a chart I want to own on the long side, yet. 

IVOL remains at a Premium in the major indexes – meaning the bulls are nowhere near complacent, they’re hedged. 

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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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