RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Market Risk: 

*ECB: Wage growth will be very strong in the next quarters, but real wages will decrease more in the coming months – Econ bulletin article

*China reopens – ending international travel restrictions, scrapping mandatory hotel quarantines for arrivals – energy prices higher

*US House of Reps:  Rep. Kevin McCarthy was confirmed as the 55th speaker of the HoR following a record 15 rounds of voting

Last Week in Review:

SP500 +1.45%, NQ +0.98%, RTY +1.79%

10yr yields -19bps

Oil -8.38%, RBOB -9.00%, Nat Gas -16%

Gold +2.50%, Silver -0.18%, Platinum +2.05%, Copper +2.89%

Market Comments:

Energy continued its descend lower, rebounding this morning, but ultimately remain BEARISH.  Metals are behaving well.  Gold could make a run at the 61.8% fib level at 1900 before stalling – we’re currently holding NO gold (after booking gains with a trailing stop), and the FOMO is real as Gold trades north of 1880 on the Feb contract.  I’ll be patient with metals here, seasonally strong period for Silver kicks in on Friday/Today, we’ve also booked all of our Silver profit from last weeks trade recommendation.  Copper traded above 4.00lb this morning, but it now immediate OB. 

ISM Manufacturing PMI slowed to 48.4 (sub 50 = contraction)

Services PMI slowed to 44.7 (sub 50 = contraction)

NFP Employment +223K vs 200K exp

Unemployment rate 3.5% vs 3.7% exp/previous

Wages m/m 0.3% slowing from 0.4%

Wages y/y 4.6% slowing from 4.8%

Comments on NFP: 

Moderating job growth and slowing wages – the market chose to take the “glass half full” outlook on Friday’s labor report.  Slowing wages = inflation slowing … True … but I contend that one must take into account what a slowing consumer means for spending (70% of GDP), retail sales, corporate profits/earnings, and ultimately domestic growth.  I contend that the consumer is NOT in a good place at the moment, as demand for goods and services continue to show contraction in the data. 

Bookmark this morning’s note:

Following the House of Reps historic 15 round voting marathon to confirm a speaker (another once in 100yr event), Kevin McCarthy was finally confirmed as the SOTHR – I just made that acronym up.  While some view this infighting by Republicans as positive (simply democracy at work), I’m going to look at this as a preview of what is likely to come over the next 6-8 months.  Sometime over the summer Congress is going to have vote (again) to raise the debt ceiling to pay for future spending obligations – and the hemming and hawing over the speakership seems more like a proxy fight and preview of future events.  There’s speculation that some members in congress will not vote to raise the debt ceiling, even if it comes along with the promise of future spending cuts, and democrats may be unwilling to go along with any spending cuts whatsoever.  A failure to raise the debt ceiling would result in a downgrade of US creditworthiness – this happened in 2011 despite reaching a last minute deal on the debt ceiling.  Standard and Poor’s downgraded US debt to AA plus (down from AAA), citing “The downgrade reflects our view that the effectiveness, stability, and predictability of American policy-making and political institutions have weakened at a time of ongoing fiscal and economic challenges”.   Debt servicing costs are now 10% of tax revenues (a 30yr high) – leaving less room for additional spending.  I recall this happening in 2011, a swift drop in US equities and a flight to safety in US Bonds, and ironically enough a top formed in the Gold market following the downgrade.  I may be perhaps making a mountain out of a mole hill here, but there is certainly precedent of these events. 

I’ll open up the floor to “a la carte” market profile request on other markets today.  Gotta run, best of luck! 

Market Trend > 6 mo Range Low Range High Momentum OB/OS
           
SP500 Bearish 3769 3934 Negative 91
Nasdaq 100 Bearish 10,707 11,254 Negative 93
Russell 2000 Bearish 1725 1817 Neutral 88
10yr Yield Bullish 3.52% 3.91% Positive 2
VIX Bullish 20.07 24.03 Neutral 27
Oil Bearish 71.55 79.89 Negative 50
Gold Bullish 1809 1884 Positive 77
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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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