There’s no way to quantify or determine what is going to happen in China next – that’s the truth.  What I do know is peripheral macro markets are crashing.  Copper, Oil, Ags, Interest Rates – they’ve all broken bad and are sitting at crisis levels. This is either the biggest “head fake” in markets or something really serious is upon us. I’m not afraid to say that I don’t know. However, the plan going forward is enlist our Economic Scenario 4 playbook of Growth/Inflation Slowing.  The market moved early, and now all that we can do is react to it. Which means we’re sellers of Commodities and Stock Indices at the top of the range, specifically energy and the Russell 2000 (back to bearish trend) and Buyers of the Dollar and Bonds at the Low end of the range. More on this later…..

A quick rundown:

Stocks – there’s a case to be made that there’s a chance that 3337.50 in the SP500 is the top of this cycle – for now anyways or at least until the FED GETS MORE DOVISH. Nasdaq rallied on the Amazon Earnings, after largely spending the day in the red. We’re giving those gains back this morning into the weekend and month end. So long as the VIX trades north of 15.00 (our bull/bear line) – we’ll be bearish on Equities, specifically the Russell 2000 small cap index.

Oil-  hasn’t been able to pick up its head since crashing from 65.00. 50 million Chinese people have been basically confined over there.  Travel bans and travel warnings issued, including the USA. Demand is likely to be severely affected.

Gold- watch this carefully – if there is a broad based deflationary/everybody runs to cash type event on the horizon, I don’t think Gold will hold up either.  1600-1610 – IF we get there, I don’t think we get past there in the near term. Again, we’ll be buying Gold at the low end of our range, trying to be patient here.

10yr yield- Continues to crash.  1.54% Last! Low end of our range here, so please don’t chase bonds here.  If we see 1.75% in yields, we’ll send you a signal.

Currencies- The Pound is ripping higher (2 day rally) trading 1.3165. Brexit Day is TODAY. This should make the UKs economic outlook a little less ambiguous than the past few years and when Fed decides to get more dovish, we think the Pound benefits the most.

Coronavirus- I hate, HATE the fact that we’ve gotta keep an eye on such an outlier event like this – typically I’d rather just stick to the data and economic cycle, but that’s just not the case here. With 50 million Chinese quarantined, travel bans, and people dying – you have to be concerned about downgrades to the Chinese economy.  More on this later….

Actionable Levels – Buy/Sell at the Low/High ends of these ranges provided. ALWAYS TRADE WITH OUR TREND AS WELL.  GOOD LUCK.

Feel free to reach out to John Caruso at 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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