Bull and Bear Market

2% guaranteed vs maybe a down -10-15% is the question….

That’s the question investors are asking themselves as we speak, hence the disconnect in yields and stocks. Do I take the guaranteed 2% on a 10-yr gov backed instrument or risk losing 10-15% in the stock market headed into a likely dismal earning quarter? 

Yields can’t catch any bid of any consequence as the rest of the world’s bond markets flirt with (or are already) yielding negative returns.  I mean, 2% in the U.S. sounds pretty damn good vs. say a German 10-yr Bund yielding -0.37% or the JGBs floating at -0.15%. Money will continue to flow to the U.S. bond market for yield. 

Oil is crashing – big sell following the Iran and Opec noise. By the way, if anybody wants to know why OPEC extended cuts its because they know demand is expected to decline over the next year.  The initial push in crude on Sunday night was a classic bull trap – Probably sucked a lot of people in on the long side, now getting plowed -4.00% since the beginning of the week. Oil is a sell in the 4th Scenario of the model (G/I slowing)

Small Caps (Russell 2k) getting racked -2% since the trade truce gap up open Sunday night.  Tapped the top of the range at 1591 yesterday, anybody sell?  Some of you did – nice play. 

Oh yeah, yesterday marked the longest economic expansion in world history – headed straight into slowing growth/inflation/and earnings reports

Pretty much signing off for the holiday – I’ll be in half day tomorrow and just the morning on Friday.  You will hear from me if adjustments need to be made.   Happy 4th of July – JC

Feel free to reach out to John Caruso at jcaruso@rjofutures.com or 1-800-669-5354 if you’d like to get a 2 month free trial of our proprietary trade recommendations by email. 

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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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