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Market Insights - Equity Risk Levels are Rising for July 31

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"you dont need me (or anybody for that matter) to tell you to buy 5 stocks" - me

Risk Levels are Rising in the Immediate-term..

Another 1.4M Americans filed for unemployment benefits last week on top of the depression era-esque GDP figure yesterday, had even Jerome Powell acknowledging on Wednesday that the recovery had slowed. The bond market has totally nailed this move. The 10yr yield is now sitting at 0.53 bps! Ignore the bond market, I dare you. Hopefully this is why youre here because you dont need me or anybody to tell you to buy 5 stocks (you know which ones). Not to mention any fool can stare at the Dow Jones, Nasdaq, and SP500 and feel good, but what most dont understand are the peripheral macro markets and what theyre whispering at you. Recall back at the midway point of 2018 the 10yr yield was trading at 3.25% !! Today were sitting at 0.50% !! That didnt happen overnight. The bond market completely nailed the cycle top in markets in Q4 2018, but stocks largely ignored the undercurrents of the market and continued to melt higher throughout 2019 which we understand that that is typical. Stocks are the dumb money, Bonds are the smart money. Follow the money flows. If yields were moving in the other direction, Bond traders would be telling you that the immediate to intermediate future outlook of the market was positive. Im not here to scare anybody, but rather keep you informed and aware of the undertow of macro.

The rundown:

Global Equities were largely mixed overnight, Europe was lower, China broadly higher, and the US looks fairly mixed to down this morning following a big day on Big Tech earnings. Our volatility signals are still signaling risk-on in markets, but you know as well as I do that that can change quickly.

Bonds and Interest Rates staring at 0.53% on the 10yr yield this morning. Signaling that all is not rainbows and puppy dogs within the US Economy. Ive trade some bonds in my PA lately, its a boring trade, but if they want to manipulate interest rates Ill take advantage of it. On that note, adjusted for inflation, buying the actual 30yr or 10yr coupon is a horrible return where yields are sitting maybe the worst on Wall Street. So what that means is the Fed is attempting to once again create an environment where Bonds are a poor investment on expected return, Gold is still good but honestly how much Gold can you really own.leaving investors with no other choice but to invest/chase Stocks. Equity risk is still elevated in the immediate-term however.

Agriculture- Soybeans and Wheat catch a bump overnight honestly Wheat may have the best looking chart structure of them all but *Disclaimer: Im not a technician I usually outsource for that information. Soybeans just largely look range bound.for now, but we do think a nice move north of 900.00 bushel is highly probable so long as we hold above 872.00 However, theyre not going to make it easy for you!

Seize the day. Enjoy the weekend if we dont talk to you today. Good Luck.

Actionable Levels

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About the author

John began his career 15 yrs ago at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. John first began to interpret different market strategies and ideas as an individual investor at the tail end of his college years. By 2004 he was opperating one of the largest retail books at Wilshire Quinn Capital.  In 2006 John moved to Chicago based Lind-Waldock where he began to expand his knowledge and hone his trading skills in the futures industry. He joined RJO Futures in 2011.

John's focus is to identify and service the needs of each and every one of his clients and suggest investments based on those needs.  John has a very unique way of interpreting markets, focusing on broader economic trends based on growth and inflation metrics.  His technical study is also unique, which combines a proprietary market range calculation and charting trends across multiple durations.  

Contact Info:

John Caruso

Senior Market Strategist


Twitter: @JCarusoRJO

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