RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Good to be back. Getting right into it, we saw markets jarred loose from the monotony we’ve bared witness too over the past few weeks.  Stocks skidded out yesterday following the release of the Federal Reserve Minutes.  The highlights:

*Concerns were expressed over the risks associated with a rapid expansion of the balance sheet.

*The committee also expressed concerns around the idea of “yield curve control” aka target levels for interest rates associated with Treasuries.

*In the same breath mentioned the need for accommodative policy for some time to come.

Interesting enough, the FED now seems to be growing a conscience around their highly irresponsible policy tools and the potential dangers associated with them. 

Treasury Yields/Bonds- rates initially jumped/bond prices fell in the wake of the minutes release, but look at that…yields back to under 0.70 bps and bond prices are ripping back this morning.  Easy call to make as just about every “headline chaser” thought they had it all figured out yesterday. Thanks for coming out “Mr. Macro Tourist”.  Now, looking ahead, and I hate that because now I’ll get 100 questions about it shortly after this email – we do have the U.S. moving into Economic Scenario 2 in the model heading out into Q1 2021, GROWTH ACCEL, INFLATION ACCEL – This is the scenario that presents the market with a “higher” interest rate environment – we’ll make that turn when we deem it appropriate.  Trend line for the 10yr Yield is 1.09% – that’s a ways away, and until then we’ll hold our “bearish bias” on interest rates/bullish on Bond prices. 

US Dollar- The dollar bounced aggressively yesterday and some additional follow through overnight (looks like we’re backing off some now, however). I actually think the dollar has a window to bounce here as it’s been cozied up to the low end of our range for about 3 weeks now – I thought that even prior to the Fed announcement yesterday…..here’s why:

Gold/Silver- Gold actually signaled an implied volatility DISCOUNT headed into yesterday’s session.  What do we know about implied vol?  When they fall into a discount – that is a classic complacency signal through the option puts vs calls ratio.  To put it bluntly, nobody was concerned about hedging aka nobody thought the market could go lower in the immediate-term.  Sure enough BAM, you’re down $60 an oz in the Gold market inside of 1 day.  Low end of my range in Gold is 1916.00 oz.  My personal bias thinks Gold and Silver are likely to fall into a wide trading range – which I love, because trading the “Chop” is where one of my strong suits within the framework of our model. 

The one thing I’ve learned about markets over the past 17yrs is that just when you think something CANNOT happen, it happens.  Stocks will never go down again…. Hmm?

UPDATE: US Jobless Claims jumped back over the “million” mark +1.106M

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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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