The probability changed from a “risk-off” scenario – to a continuation of more “Stagflation”. That’s how we’re reading the model the morning. So for those that were gung-ho about another bout of Scenario 4 aka Risk Off in Q4, we’d be doing you a disservice if we stayed with that call for now.  The biggest risk we face in the near-term is unfortunately being held over our heads on Capitol Hill, in the form of more CTRL + Print MMT dollars. I’ll remain agnostic and bound to data and price action – all of which suggests more Scenario 3 stagflation in the near-term. 

US Dollar- I can’t stress enough the importance of the US Dollar – trading back on the lows of the week this morning ahead of the stimulus deadline in Washington DC today. We got you out yesterday, and will remain vigilant if we deem necessary to get you back in. For now, that trade is off and risk levels remain elevated for more US Dollar devaluation by our “friends” in Washington DC and the Federal Reserve. 

10yr Yields- approaching the 80bps mark again this morning.  A very important level indeed, signaling a potential break to 1.00% on the 10yr yield. You have to be conscious of what may be starting to price itself in – a record amount of Treasury debt issuance out in 2021 that could be between $3-6 Trillion.

Removing the Russell 2000 Short Call from our list of “core short positions” – this is a big one as well, we’re officially pulling the Russell from our “Short list”.  1 / 4 of that index is represented by financial related stocks. IF the 10yr is on the verge of a “break-out” from its mundane trading range of 55-75bps since March/April, we don’t want to be short of the financial heavy Russell 2000 small cap index.

Notable: Copper +1.39% to 312.00

Global Equities:
SPY +0.41% NQ +0.28% RTY +0.58%

GER -0.59% FRA +0.14% UK +0.40% China +0.47% Kospi +0.50%

800-669-5354312-373-5286Series 3 Licensed

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.
Read More