Bull and Bear Market

Taking an early peak at the market you’ve got the Shanghai Index -2.8% overnight, now down -30% since January, my goodness. We see a small bounce in Germany overnight, nothing really noteworthy and still down -9.5% ytd. U.S. equities are off to a rough start pre-market– We signaled a “Sell” on the S&P 500 into yesterday’s close and according to our process we could see downside to the recent lows around 2700 and upside risk to 2835. Oil is getting smashed for the second straight session and now flirting with a “Bearish Trend” –  immediate term oversold w/ 68.50 the new low end and 72.50 on the high end of our range.  Sub 69 in oil is bearish trend and trade – a very bad look for oil prices. 

On the other side of the FOMC minutes yesterday, which were hawkish – No surprise here.  The Fed is likely to be hawkish into the Dec FOMC meeting – but we expect to hear a different tone from the Fed coming out of that meeting. In other words, we don’t think the Fed can get any more hawkish than what they are at the moment. On that note, we’ll be looking to add the 2-year and 5-year notes to our longer-term or “buy and hold” list of favorites moving forward. 

The dollar remains “king” in the currency space. The dollar as we’ve warned is a very “crowded” trade, and we’re no longer looking for buying opportunities here.  The dollar is holding its bullish pattern as the Q3 data is still being reported.  We do expect at some point in the 4th quarter that the dollar will begin to sniff out the slowing of the economic cycle ahead of slower growth/inflation data being reported.  This also plays into our “less hawkish” Fed theme following the December meeting. Hawkish Fed = bullish dollar; dovish or “less hawkish” Fed will be net negative for the dollar – and of course we believe the latter will happen. 

Quick market run down:

SP500- We’re bearish on rally’s in S&P 500 to 2830-2850 zone

Oil- No longer investable on the buy side in our estimation. The immediate term trend broke on 10/11 and the intermediate term trend this morning when we crossed 69.00. We’re bearish on rallies to 71-72.00 or until further notice with our client base.

Gold–  We’re bullish gold, but not from present levels.  Our sweet spot in Gold (as long as our longer term fundamentals still support it) is 1215-1200.  We’ll call that the accumulation zone for gold bulls. 


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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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