Morning Note: Not Why We’ve Been Adding Commodities

Hard to believe, although it shouldn’t be, that we’re back to pumping the China trade narrative — although more subtly at the moment than a year ago — to pump equity markets. Oh and it’s not only us, by the way, China’s happy to play the pumper every bit as much themselves.

Yep, China says they’re gearing up to buy “more U.S. goods.” 

Now, we’ve added ag commodities to our mix twice in the past few weeks — and we’re looking to do more — but, trust me, it has to do with the likelihood for higher inflation in that space aided by the potential for a weaker-trending dollar, as opposed to artificial price-priming, which is precisely what explains stocks at these levels, and, given the China news, the price of food this morning as well.

Speaking of stocks, as you might expect given my comments above, Asian equities, with a couple minor exceptions closed nicely in the green overnight. European equities are rallying big this morning, as are U.S. equity futures.

The VIX (SP500 volatility) is tanking; -6.44%. That’s bullish for stocks this morning, however, per this week’s message, a VIX north of 20 spells danger (high volatility) for U.S. equities, it’s at 30.82 as I type.

Oil’s rallying 2.6%, gold’s up $14, silver’s up 1.7%, copper’s up 2.3% (we added industrial metals this week, btw) and, per the above, ag is mostly in the green as well.

Treasuries are down (yields up) this morning, which pretty much seals the risk-on deal this morning, at least at the open.

I should warn you, today could get a little weird. It’s the third Friday of the last day of the quarter, and, therefore, it’s the heaviest day for options and futures expirations. I.e., lots of stuff rolls off today, which often leads to some crazy price swings.

Beyond today, we’re about to head into what is often the most turbulent quarter of the year, and this year’s setup suggests it could be a doozie. 

Stay tuned…


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