Bull and Bear Market

Equity futures were red for the bulk of last night’s trade, but are starting to recover in the 7AM hour.  I’d expect a bounce in the next few sessions towards 2785 in the S&P 500 futures. One thing I’d like to address today is earnings reports – w/ about 20% of the S&P 500 reported (91/500) – we’re seeing earnings growth rate at 20.9% y/y currently vs Q2 at 25.3% y/y and Q1 at 26% y/y – which was a record growth rate in Q1.  At first look, you’re saying to yourself that 20.9 is a strong earnings growth rate, and you’d be correct, however what we’re focused on (if your doing macro correctly), is whether we’re accelerating (getting better) or decelerating (getting worse).  From Q1, thru Q3 we’re seeing a rate of change growth slowdown. We’ll continue to monitor this as more EPS reports hit the board throughout Q3. 

All around the world:
China +0.33%
Japan -0.38%
Germany +0.93%
US -0.04% (sp500) and + 0.07% (Nasdaq)

Oil- is rebounding from it’s bludgeoning yesterday – hanging right around last month’s lows at 66.80 +0.56%.  The Saudi’s are in “pump mode” – their words not mine – and it’s likely a deal struck by the Trump administration and Bin Salman, following the murder of Washington Post journalist Khashoggi, and ahead of the US mid-terms and Iranian economic sanctions.  We have been alarmed at the rate of this decline, and believe we’ll likely bounce and retest $70.00 again into y/e – but we remain bearish on oil’s rally back to the top of our respective trading range. 

Gold- sliding on more strong U.S. Dollar – we maintain that the USD rally is likely in the proverbial 11th hour – We’ll look for anything out of the ECB tomorrow that suggests a pivot in the USD vs Global Currencies.  The Japanese Yen and British Pound may actually be the best places to be in the currency space moving fwd – not there yet however. 

Bonds: we’ve had trouble holding rallies in fixed income, but we maintain that this price action is likely a bottoming process….remember: bonds have been going down (rates up) for 3 years now, and with the U.S. likely “past peak” in the economic cycle, we believe the Fed is also “past peak” with it’s interest rate tightening cycle.  Stay long here. 

Tomorrow we have an ECB meeting and we’ll try to bring you the highlights of that meeting tomorrow. 
Today: New Home Sales and a host of Fed speakers
Thurs: ECB, Durable Goods, Trade, and Jobless Claims
Friday: Q3 GDP (1st est), and Consumer Sentiment

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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