Bull and Bear Market

A quick rundown-

Stocks went back into crash mode, with Asian equities leading the charge – That didn’t take long following Chinese stimulus efforts over the weekend. Shanghai Index was down -2.25%, Heng Seng -3.0%, Nikkei -2.53%.  Heavy U.S. selling in the U.S. futures markets began at approximately 7pm cst and picked up steadily throughout the overnight.  S&P500 -1.37%, NQ -1.62%, Russell Index -1.0% – all bearish trend.  U.S. equities are quickly descending to the low end of our ranges, so do not run out and short stocks off the open. You know better than that. Properly managing the market ranges is THE MOST INVALUABLE part of our trading methodology.    

Flight to safety in the U.S. Fixed Income markets is beginning to manifest – 30yr +0.6%, 10yr +.32% and gold +1.37%.  This is likely just the first inning of this move.  These are macro events that are just beginning to manifest, and your CNBCs can’t point to “higher rates” today. We don’t chase headlines. U.S. growth slowing is set for the next 2 quarters, and China is set to slow further.  The trade war with China has lasted longer (and even has gotten deeper) than what many expected – and will continue to escalate.  Global growth forecasts are expected to slow from 3.5% to 3.0% as the IMF continues to pair back their forecasts. 

Also remember-

*Corporate profits and earnings will soon have to compare against tax cuts y/y – coupled with rising U.S. working wages, this will not be a good look for forward guidance.

The Fed and Interest Rates Outlook:

The Fed will likely look past weaker headline inflation and continue to tighten rates to contain underlying inflation.  However, we do believe the Fed is closer to the end of its tightening cycle than certainly the beginning.  We’re forecasting that Fed will likely raise rate until mid 2019, pause, and then begin to cut in 2020.  The Bond futures are some of the heaviest shorted markets in all of Macro data according to the CFTC.  Once again, if I’ve learned 1 thing in my 15y years of experience, it’s that “heard mentality” is rarely correct for an extended period of time.   

Market Bias’s

bearish Equities via SP500, Nasdaq, and Russell  

bullish Bonds – still bearish trend and non-consensus

bullish Gold

bearish USD – still bullish trend and non-consensus

bearish Oil

Once again – None of the above matters if you don’t know how to properly manage the trading ranges. 


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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