RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Good Morning,

Yesterday’s action was interesting to say the least – following the ADP, Initial Claims, and the record ISM Non-MFG PMI data (64.0 vs 62.7 prior) markets fell into a mini-taper/inflation tantrum. Better employment data from here on out only feeds the idea that the worst of the inflation is yet to come, and with the Fed still running its QE at $120B/mo., you’ve got to believe a taper is being discussed inside the walls of the Federal Reserve. We’ve recently thought as early as July, but could they surprise with a June taper? Unlikely in my opinion. But, could a Fed taper spark a Scenario 4 market reaction coupled with slowing y/y Growth/Inflation data (as we expect) – it certainly could, and we’ve had July pegged as a pretty high probability period of risk in markets. 

Oil- remains steadfast at 69.00 and looks to be on its way into the 70s. Bullish trend, positive momentum, closing in on the top of the range warrants a “sell some” but we remain bullish of oil prices from here.   

Gold- a big wipe out yesterday on higher yields and a Fed taper possibly on deck – offered us an opportunity to look to reposition here. Gold could struggle as Scenario 4 looms in July, but ultimately we think gold will begin to perform much better out into the Fall and into year-end. We still like SILVER better quantitatively speaking, as silver is Bullish trend. 

Yields- Bond yields traded up 3bps and have immediate upside to 1.69% in the 10yr. Yields like the idea of stronger employment and the possibility of a Fed taper on deck. 

Non-Farm Payrolls are due up in about 15 minutes and so I’m going get going here. 650K expected, 5.9% rate, and keep an eye on wages and revisions from the May number. 

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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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