Daily Rundown: March 10

JD DURKIN: Good Friday morning, members. AAP member Carley Garner joins me now to help discuss what futures and commodities are telling her about the broader market. Be sure to check your alerts for Chris Versace's full take on the jobs report and so much more. Let's begin the conversation right there. First of all, hello, Carley. Thanks for joining us.

CARLEY GARNER: Good morning. I'm a little under the weather, so please bear with me. But I think we can get through it.

JD DURKIN: Hey, of course, especially for a big day like today. I'm appreciative that you're here nonetheless. It was a volatile week, to say the least. First, of course, we had Jay Powell's appearance on Capitol Hill to the Senate and the House. Now, of course, this Friday morning, we got the print for the jobs report for February. Talk to me, Carley. What stood out to you most during this trading week?

CARLEY GARNER: The one thing that I really have my eye on is trader positioning. On the future side of things, we have a report. It's called the Commitment of Traders Report. It's issued by the CFTC, which is the Commodity Futures Trading Commission. And it tells us where speculators and hedgers are positioned-- specifically large speculators, small speculators, and hedgers.

And we've noticed that in treasuries-- specifically the 10-year note futures-- large speculators are holding the second largest short position in history. And if you go to the E-mini S&P futures, which is obviously the stock index futures, speculators are sitting on one of the largest short positions in history-- not the, but let's say in the top five. So the whole world is short futures here in both stocks and bonds.

And we're wondering if that's maybe a signal that most of the selling is behind us. Even if the fundamental story is still bearish, which obviously it is, if most market participants have an opinion and have already expressed that opinion in the market, at some point we get to a point where we just simply run out of selling. And markets generally turn the corner way before the fundamental story does. So we've got our eye on the short position and the potential of a short squeeze going forward.

JD DURKIN: Looking ahead, Carley, what kind of trading do you see on the horizon? And I wonder, are there any potential catalysts that maybe we are not yet paying close enough attention to?

CARLEY GARNER: I mean, I think at this point, we don't know what we don't know. Catalysts tend to be something that surprises the market. So there's just been, since 2020 through basically today, we've had a seemingly unlimited number of catalysts come through the pipeline, most of them unexpected. So I mean, all we can do is take it day by day.

But with that said, I do see some signs of life. I mean, I'm not saying that the stock market is going to bottom out tomorrow and move dramatically higher. But the reality is we're trading sideways. So even though the bulls are getting really excited on the rallies and the bears are getting exciting on the sell-offs, we're really not going anywhere.

So nobody's winning or losing. And honestly, I think that's a win for most people overall. Sideways is good, especially compared to the alternative with these types of bearish narratives.

JD DURKIN: Now, looking at futures, you have to keep an eye on volatility overall. Can you help explain why even long-term investors can use an understanding of volatility to their advantage?

CARLEY GARNER: So even people that aren't actively trading volatility or trading options can use some of the tools that option traders use or speculate on, products that option traders are speculating on, to their advantage. So for example, if you're just a long-term investor in the stock market, a mom and pop investor, if you see the VIX popping up to 25 or 30, that's generally kind of a signal to maybe dollar cost average some of your holdings.

So even if you're not trading volatility, it's a good idea to keep an eye on it, just to know what's going on. The VIX, obviously, can go higher than 30, can go higher than 40. We've seen it much, much higher on rare occasion. But the reality is 30, 35 is usually kind of the peak in the VIX for the most part.

So if you're the type that's buy and hold, that's a pretty good entry point in the long run in most scenarios. I don't want to say always. There's always surprises. But most of the time, that'll pay off well for you.

JD DURKIN: There are always surprises. We certainly know that. Now, over on Real Money, Carley, you recently wrote that you're seeing a decoupling in asset classes. Put simply, stocks are trading individually of one another instead of trading higher or lower as a group. Do you still feel, I wonder, this way? And is this business as usual environment more or less here to stay, you think?

CARLEY GARNER: So obviously, the last couple days, maybe that's changed a little bit. But with that said, I was really more focused on the correlations between the stock indices and other assets. So for example, stocks versus bonds or stocks versus commodities, crude oil, ags, gold and silver. When you start seeing all the markets-- commodities, bonds, and stocks-- trading as one, like we did in 2022, it's a really obvious sign that something is going wrong.

And what it tells me is that the system is fraught with margin calls and forced liquidation. What you generally see is people that are getting in trouble in one market are selling other holdings to pay for margin calls in this whole holding and vice versa. And so it just kind of feeds on itself, and people hit the sell button all at once.

Most accounts are electronic now. Most traders are trading electronic. And most platforms have a button that says Liquidate Everything, and I think traders use that. And it tends to exacerbate a lot of the sell-offs. But we're breaking away from that, and I think that's a good sign going forward.

JD DURKIN: Now, moving our focus on over to commodities, if we can, for a moment, the Energy Select Sector SPDR Fund, or the XLE, holding in the portfolio. Talk to me about how crude oil has been looking to you specifically. And probably a bit more importantly, what do you think is ahead?

CARLEY GARNER: So the crude oil market has absolutely flatlined. Moving averages are going nowhere. And it's interesting to see that, given that everybody has such a strong opinion on where crude oil may or may not be headed.

My personal opinion is we've probably gone away from a sell-the-rallies type of regime into a buy-the-dips kind of regime. But I don't think we've seen the lows yet. I think we've got a round trip into the mid to high 60s before we get some good buying coming in. But at some point later in the year, I think we could see upper 80s, maybe even mid to low 90s. So that's what I'm looking for.

JD DURKIN: OK, let's talk gold. The portfolio also has the SPDR Gold Shares ETF. What's important there for you that you think our viewers might want to know?

CARLEY GARNER: So the one thing to keep in mind in gold is it's kind of a slave to the US dollar. The US dollar index rallied for a couple of weeks, but it ran up against some resistance in the 105, 106 area. And that's kind of what we expected to see. As long as that continues and the dollar weakens from those resistance levels, I think gold has a way to move higher. I wouldn't be shocked to see gold over 2,100 or so by the end of the year.

JD DURKIN: All right. Finally, here, let's conclude on a question that our portfolio manager, Chris Versace, sent over. Given the club's position in Deere. We've seen corn, we've seen wheat prices move lower in the last few months, Carley. But the coming months also bring the spring planting season, so we talk some of the seasonality aspects of this. What will you be watching between now and then?

CARLEY GARNER: We're still seeing pretty lofty prices in corn and soybeans, even after a big correction. But the wheat market, to me, is the one where we might start seeing some bargains. We've experienced a mass liquidation event. A lot of speculators went long when Russia invaded Ukraine, and it's taken a long time to work that out of the system.

But now I believe that prices are actually trading well below fundamentals. So at some point, wheat probably has a pretty good chance to rally. Unfortunately, for some of the commodities stocks, particularly Deere, corn and soybeans probably tell a different story. So all in all, not a bad situation over there, but it's not going to be the 2021, 2022 rallies that we saw previously. Those days are probably behind us.

JD DURKIN: Well, I'm very thankful for you joining us today. Thanks a lot for being here. Happy Friday. Enjoy your weekend, Carley. Great to have you.

CARLEY GARNER: Thank you. Appreciate it.

JD DURKIN: All right. To all of you members still watching at home, Chris Versace and I will be back on Monday to get you ready for another very busy week ahead. Have a great weekend, and we will see you then.