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Market Outlook: Jan. 8, 2021

Contributor:
RJO Futures
Visit: RJO Futures

By:

Senior Asset Manager

“Remember when I asked for your opinion? Yeah me neither.” – The stock market to every political narrative

Good morning,

The rundown:

Stocks:

That’s right, fresh All-time high’s yesterday, and of course “all-time is a long time”.  Stocks don’t care about hooligans storming the capitol, just like they didn’t care when our major cities were being torched by ingrates this summer.  Hello! McFly…It’s the cycle!  Its always about the cycle!  Growth accelerating/inflation accelerating through the first half of 2021 as y/y comps of macro data and corporate earnings and profits may perhaps express the greatest rate of change acceleration since post WW2 – Scenario 2 in the model remains our call until further notice.  On that note, stocks are now immediate OB within our range analysis – scale some back. 

Yields:

The 10yr yield is up again overnight to 1.09% ahead of the US Unemployment report due out at 7:30am CST.  Perhaps the most significant development this week was surpassing the 1.00% level in 10yr yields as growth and inflation is set to continue their acceleration through Q1/Q2 2021.  We’re trade immediate OS this morning in the 30yr and 10yrs, trim some, so we can replant (get bigger) when yields move back to the low end of our range. 

US Dollar:

No coincidence that the dollar has ceased its decline this week as yields pressed through 1.00%.  But recognize that this trade isn’t likely to get too far on the upside in the near-term.  We do believe the Dollar has entered a secular bear market that may last for many years to come.  We’re still sellers of USD AT the top end of our range within the longer bear market cycle.  BONUS: Gold and Silver got hit overnight.  Gold is now at the low end of the range, remains bullish trend, but not one of our favorite places to be at the moment in a rising yields environment.  Remember up yields = up dollar = down Gold, and this is precisely the action we’re seeing today.  Ultimately we expect Gold to remain range bound for the near-term. 

MarketTrendRange LowRange HighNotes
     
SP500Bullish37103821IV PREMIUMS remain elevated
Nasdaq 100Bullish12,64613,047IV PREMIUMS remain elevated, but not a “lower high” in my range is showing up.
Russell 2000Bullish19832112Immediate OB – but this is not a SHORT recommendation – wait to buy at the low end.
10yr YieldBullish0.94%1.07%1.00% overnight…Growth/Inflation accelerating = short bonds/Long yields
VIXBearish21.0125.71We think Volatility remains a “sell side” trade from the top of the range….for now.
OilBullish48.3952.23nearing immediate OB levels here around $50.00
GoldBullish18801948Gold will look worse if it break 1860 – but at the moment it’s immediate term trade OS at low end of the range
USD (Cash)Bearish89.390.28Still drowning – short position in the USD is now rivaling the year 2006 – crowded trade here
EUR/USDBullish1.21.23Immediate OB – may be forming an immediate-term top
Bitcoin FuturesBullish27,48542000?Relentless buying in Bitcoin – not sure how much longer this lasts at this rate.  176% above the 200 day MA

These are proprietary trading ranges from RJO Futures. They are calculated by a customized standard deviation tool.

Originally Posted on January 8, 2021 – Market Outlook: Jan. 8, 2021

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