RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Has our Scenario 4 call all been priced in? 

After a 3 day sell off in stocks, is that all she wrote on our call of Scenario 4 in Q4? I don’t know to be quite honest with you and we’ll continue to monitor the day to day price action and confirming economic data releases.  Over the weekend Speaker Pelosi gave the Trump administration 48hrs to pound out differences between both parties on a stimulus package. It looks like we’ll get a vote in the Senate over a “skinny” $300B aid package, but it’s highly unlikely to pass through the House Dems. We still are of the belief that stimulus is unlikely ahead of the election. Also, Johns Hopkins University is now estimating Covid-19 cases at over 40 million worldwide! 

US Dollar- the glue that’s been holding it all together and what our Scenario 4 call together, aside from the data, is married too. The Dollar is back down this morning, following a 2-3 day bounce, following renewed stimulus efforts. Down dollar, risk assets Up. Our call was for another bout of Scenario 4, growth/inflation slowing renewed bounce in the US Dollar, following our bear market call in the greenback from June. This clearly has not panned out as the market goes from Scen. 4 back to Scen. 3 this morning.  The remains our only outstanding long position in our ***Trade Signals. 

Stocks- the NASDAQ has sweated off its consensus “bearish” position from last week, so let the “bubbly” games begin all over again. The implied volatility discounts in the Nasdaq of -12% has now moved back to a PREMIUM – or in other words a complacency signal. That’s a key signal, alongside the VXN (Vol index) to watch carefully. In terms of the election, I get asked this question a lot – In the event of a “blue wave”, I’d expect stocks to struggle into year end with the outlook of tighter regulation and higher capital gains taxes to take effect for 2021. This may prompt investors to book gains in big Tech into year-end, to avoid a tax increase the following year in the event of a Biden win in November. This is a very real probability. NASDAQ upside in our range goes all the way back up to 12,249 this morning. 

Gold/Silver- +0.64% and +2.34% respectively this morning on stimulus talks and “down dollar”.  Momentum indicators are still “bearish”, which could mute the gains in both metals out into November.  While it’s nice to see both trading higher, we still think Gold/Silver could struggle into year-end (like many other risk assets).   

I’m playing catch-up a little bit this morning, having been out since of the office late last week, so we’ll get back with you after the opening bell. 

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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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