Markets reversed hard yesterday…following morning strength the reversal hit roughly around 11am CST and then approximately 30 min later we had news of our first Omicron case in the USA. Not to mention, Powell doubling down on a faster pace of the taper yesterday. So, for the 3rd day out of 4 (since the selling began last Friday) everything that could go wrong with stocks, did. Uncertainty remains in high supply at the moment, and it’s natural that your first reaction is to retreat, when in fact I believe you should be leaning into this – at least this is what recent history has told us to do not to mention our indicators. So right now, I believe the market is in the “digestion” phase of the news – we haven’t been hit with a news cycle such as this since the September sell-off on Evergrande and Delta variant. Going to cash on that news cycle back in Sept and VIX > 28 proved to be a terrible decision, and with our Q4 GDP projections north of 7% we don’t see any cycle risk. Yes, Powell hit us over the head with a 2X4 – while we expected a hawkish pivot by the Fed, we didn’t expect it until at minimum the January meeting. 

While we’re in the midst of cycle phase transition, as inflation slows off of 30 year highs – the growth cycle remains strong.  IVOL premiums remain extremely bloated with the SP500 at +92%, NQ +70%, and RTY +69%

NFP Payroll Data is due out tomorrow

I’ll have our TRM table and numbers out shortly. We are at the low end of plenty of ranges/with trends still intact. Back soon.

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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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