Bull and Bear Market

With the mid-terms in the rearview mirror, it looks as if the markets are breathing a sigh of relief.  The S&P 500 has topped 2800, nearly 200 pts off of the recent lows marked on Oct 29th at 2603.00 – pretty much in a straight line too. We’re now getting an immediate term overbought signal, while simultaneously getting an immediate term oversold signal in the cash VIX.  Our quantitative analysis and past instances of using this signal suggests that this is a high probability trade.  Furthermore, with a likely hawkish Fed on deck tomorrow, and an expected slowdown in headline PPI (Friday) and CPI (Monday), we think this adds further “fundamental” fuel to our quantitative analysis. 

Here’s the rundown on the “Big 4”

S&P 500- See the above analysis – overbought within a bearish trend and our call of growth/inflation slowing over the next 2 quarters, keeps us with a short bias on US equities. 

Bonds- whipsaw reaction to last nights mid-term election results, but ultimately positive. Once again, the key question is how much of the “hawkish” fed is priced in, and will headline inflation slow come Friday and Monday’s reported data – we think Yes! And are bullish of bonds from current levels.

Gold- Whipsaw in the gold last night.  Gold is keying off the dollar, and remains within a neutral to bullish set up on the charts.  We still think that Gold will catch a sturdy bid higher within the next 1-2 weeks.  Our upside target in the near-term is 1260.

Oil- the bloodbath continues in the oil space, -0.50% on the day and -19% mtd. Oil could find channel support at 61-60.50 but clearly bearish trend, and we’ll look at selling rally’s back to the top of our range.  Any expected Iranian oil production declines via U.S. sanctions will likely be picked up by the Saudi’s coupled with softer demand outlook moving ahead from the U.S. and China. With the mid-terms behind us and presidents motivation to keep Oil prices low heading into the elections, it would not shock us to see oil float higher in the immediate term. 


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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