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Market Outlook: Dec. 3, 2020

Contributor:
RJO Futures
Visit: RJO Futures

By:

Senior Asset Manager

Before you read any further, our Inflation tracker ticked up to 1.23% y/y in Q4 and we think that could easily DOUBLE by Q2 2021 to 2.4% AND US GDP could print more than a 10% y/y acceleration by Q2 2021.  Yes, if this is the case and we’re correct….Bond yields aka real rates are going HIGHER!  You know what doesn’t like HIGHER interest rates?  Gold. 

Rundown:

US Dollar: 

The USD is now entering perhaps a “crash” phase.  -10% since June, you can clearly overlap a chart of the Fed’s balance sheet expansion and the US Dollar Index from June to present and see it “gator mouth”.   While main street doesn’t fully understand the ramifications and consequences of this, we are very much aware, and are able to capitalize on these macro driven, inflation accelerating situations.  Scenario 2 – Growth and Inflation Accelerating remains the call for the next 3-6 months.

Gold & Dollar Correlation: 

A 3 day bounce, while the correlation of Gold to Dollar’s flips back to negative/inverse.  Quite the opposite over the past 3 weeks however, where Gold and the Dollar were carrying a positive correlation.  I know many of you observed this, because it quite frankly it was frustrating you.  That’s the non-linearity we speak of in markets, anything can happen at any time.  Embrace the “randomness” and play the game that’s in front of you and not the one that you want.  Now, Gold is nearing immediate OVERBOUGHT/BEARISH trend, while the US Dollar is now signaling immediate OVERSOLD (4 days straight).  We think it’s a high probability that Gold re-probes lower levels from here, and the Dollar catches a “feeble” bid.  Yes we’ve gone bearish on Gold in the near-term, but that doesn’t mean we won’t like Gold again from lower levels, if the US Dollar registers and OVERBOUGHT signal.  I’m not a “perma” anything, I’m a fully liberated trader that will move with the tides of the market.  Always remember that its important to be open minded about market conditions.  With that said, I’d rather buy Copper or Platinum over Gold at this juncture of the cycle. 

Overbought/Patience

While many of the markets we’re tracking and trading are now issuing overbought signals, we’ll have to be patient for our next entry points.  They will come to us.  You should never feel like you HAVE to chase a market, but the market always gives you another opportunity.  Patience is a big part of what we do here. 

Overnight:

SP500 -0.02%, NQ +0.14%, RTY +0.06%

A few other notes:

Oil -0.40% remains bullish trend/we’d welcome the low end of the range for a buy opportunity.

Platinum +1.89% remains bullish trend and definitely looking to add (and enter) new positions from the low end of our range here – 975.00

Corn +0.41% to 425.50 – we may look at shoring up profits here today off the open

MarketTrendRange LowRange HighNotes
     
SP500Bullish35723684Higher high in the range today – this is not a short in our opinion, you wait to buy….
Nasdaq 100Bullish12,06412,531Immediate OB here.  We remain BULLISH – wait to buy
Russell 2000Bullish17731867Still a long side trade from lower levels
10yr YieldBearish0.82%0.97%yields bounced 8bps yesterday as inflation expectations ramped!  Bonds are a SELL from the low end of yield rng
VIXBearish19.2327.31Immediate OS here – Bearish trend
OilBullish42.0747.1Waiting for an OS signal before we go all in.
GoldBearish17701853Rally’s (like today) are likely sell side trades until further notice is given – we’ll wait for the top of the range
USD (Cash)Bearish91.0392.31Immediate OS here, Dollar should bounce into the ECB next week, but is on “Crash” watch here
EUR/USDBullish1.191.21We go this one wrong, Europe data has outperformed expectations as of late.  We still think a pull back is likely
Yen FuturesBullish95.4296.86Increased long position in commitment of traders report

Originally Posted on December 3, 2020 – Market Outlook: Dec. 3, 2020

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