RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

*JOLTs (yesterday) 10.717M vs 10.0M exp (not going to help the “Fed Pivot” camp with this number)

*ISM at 50.2 above expectations, but a m/m deceleration

*ECB Lagarde:  Recession may not be enough to settle inflation

*BOE:  hikes rates 75bps to 3.00% in line with expectations

*FOMC Hikes 75bps; Jay Powell delivers a “hawkish” press conference

*China expected to “ease” up on lockdown restrictions/Covid Policy soon – Oil +3.50%

*US Employment +261K vs 200K exp, 3.7% vs 3.6% unemployment rate

Market Commentary

US Equities: 

SP500 lost -3.79%, Nasdaq -6.50% on the back of a very hawkish speech delivered by Fed Chair Jay Powell.  The Federal Reserve raised 75bps, but did signal that it may be ready to slow the pace of future rate hikes due to the lagging effects of the Feds cumulative rate hikes to date.  Jay Powell was very firm however in his post FOMC announcement press conference, mentioning that it is “very premature to think that we’re (the Fed) done with raising rates”.  Powell also mentioned that the ultimate level of rates will be higher than expected, but could not give any real clear indication of what the level would be.  So the while many in the media were expected a more “dovish” tone, or “pivot” language by the Fed, Jay Powell held his ground in the Fed’s fight against inflation.  US Equities faltered last week, but may still have a relief rally in store in coming weeks ahead.  While any relief in US equities will be welcomed, we don’t think that it will be the start of a “new” bull market, but rather an opportunity to reset bearish strategies headed into what could very well be a tumultuous start to 2023 as US domestic growth and labor begin deteriorate. 

Bond Yields:

2yr yields hit a cycle high last week following the FOMC announcement of 4.71%, and showing no indication of slowing down at the moment.  The 10yr yield tacked on 12bps w/w, and settled at 4.15% at Friday’s close.  Further stress was placed on the yield spread of the 2s v 10s to as much as -51bps last week. 

US Dollar:

The USD showed further signs of waning strength last week, finishing nearly UNCH, but finishing 236 pts off of the high.  While more corrective downside action may be seen in the USD in coming weeks, we don’t think there’s any sign that the Dollar is ready to experience a significant breakdown on the charts. 

Metals:  

Rumors of China looking to signal the end of their “Zero-Covid” policy “soon”, helped take precious and industrial metal higher into the weekend.  Gold +2.50% w/w, Silver +9.23% w/w, Platinum +2.25% w/w, Copper +7.93% w/w.  While it was certainly nice to see the metals catch a bid last week, over the weekend China began to refute those rumors of ending the lockdown.  However, we did make some important technical strides in the metals that may be enough to support further strength over the near to intermediate terms.   

*With Gold eclipsing 1680, we think there’s opportunities to carry as high as 1730-40. 

*Silver prices could carry to 21.30, with little in the way of resistance beyond that point.

*Platinum overtaking 974 in the overnight could be enough to carry it back to the 1000-1036 area

                *Copper has made some significant strides that could carry price levels higher over the intermediate term.  Copper remains Bearish trend, but a big higher low in our range analysis is underway. 

Notes:

*Oil “neutral” trend now, bullish near term trade. 

*Copper signals a higher low and higher high in the immediate term range, remains BEARISH trend

Market Trend > 6 mo Range Low Range High Momentum OB/OS
           
SP500 Bearish 3649 3906 Positive 37
Nasdaq 100 Bearish 10,604 11,476 Negative 35
Russell 2000 Bearish 1754 1878 Positive 33
10yr Yield Bullish 3.93% 4.26% Positive 56
VIX Bullish 23.72 29.62 Negative 82
Oil Dec Neutral 85.12 92.14 Positive 69
Gold Bearish 1625 1689 Neutral 88
USD Bullish 109.8 113.39 Negative 36
Copper Bearish 338 365 Positive 66
Silver Neutral 18.83 20.92 Neutral 81

DISCLAIMER:

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.

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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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