RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Last week was not up for debate – purely risk-off across all assets.  The SPY and NQ lost -4.8% and -4.6% respectively, and the CRB (Commodity) Index was -4.00% with Oil being its largest weighting.  If you’re like me, you can take advantage of counter-trend moves within that type of trading tape – we chose to buy Gold (-1.4% w/w) but still holding its bullish trend (we covered Gold when it was +$18 on Friday). 

Probably the most noticeable divergence in risk assets last week was the massive divergence between Stocks and Interest Rates.  Stocks finished on their lows of the month, while Interest Rates finished on the highs (Bond prices on the lows) – Stocks and Bond prices typically carry and inverse correlation.  So while we claimed last week as a Scenario 4/Risk Off week, we didn’t see that manifest in the Bond market (bonds are typically a top LONG position in Scen 4).  I’m not going to really argue with the tape in this case, randomness is something that everyone needs to take into account (AND EMBRACE) when you’re playing this game.  I’d imagine more evidence will emerge throughout the week and clearer path forward will emerge.    

SPY -4.8% w/w – signaled immediate oversold on Friday with a neutralized trend and broke to a negative momentum set-up on Wednesday.

USD +1.1% w/w – broke higher on safe-have demand buying.  Just flipping to positive momentum as of this morning – but immediate OB/top of range.

Gold -1.4% w/w – negative momentum set-up, but bullish trend and signaled immediate OS.  I suggest waiting before taking the plunge back into Gold on the long side.

Oil -10.0% w/w – we initially viewed Oil over the past 2 weeks as setting up for a more positive period, the market disagreed.  Momentum broke “bad” on the weekly chart, and the chart is in free-fall.  Covid-19 shutdowns and demand fears gripped crude. 

Volatility- VIX and VXN both broke north of 40.00 last week.  Godspeed to the Robinhood traders when that happens.  Those levels of volatility make it damn near impossible to “pick stocks” or “But the F-ing Dip” in equities.  I don’t know where volatility goes from here.  Volatility is episodic, clusters, and is usually non-trending.  I’ll continue to measure volatility within our bull/bear model to make decisions on our next move in the Equity Indices.

Tuesday: Election

Wednesday: FOMC Meeting

Friday: Non-Farm Payrolls

That’s a big “Oooooh boy”  –  (I stole that from a former floor trader/broker I came up with in the business – Jeff F) 

Here’s a pretty cool chart courtesy of Morgan Stanley via Zero Hedge as it pertains to the macro result of potential election scenario’s:

Key: $ denotes the probability weighting of the outcome

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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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