J.D. DURKIN: A very good Friday morning. Members want an all-AAP team member and futures and options broker. Carley Garner joins me now for her perspective as we leave the trading behind officially for the month of April. As always, be sure to check your alerts for Chris Versace's take on today's market action. Carley, thanks for being here, great to have you.
CARLEY GARNER: Good morning. Thank you.
J.D. DURKIN: To kick off our conversation on this Friday, of course, we are staring at the end of yet another month of 2023 trading. I don't know how they keep flying off the calendar quite so quickly. What stood out to you for the last month of trading, Carly?
CARLEY GARNER: Yeah, you're right. This year has absolutely flown by. So the one thing that we're focusing on at the moment is market positioning because ultimately price movements occur on action not opinions. In our opinion-- well, in our view, a lot of people have already expressed their opinions in the market. What we mean by that is the average mom-and-pop portfolio seems to be underweight stocks, even underweight duration in treasuries. The average speculator on the futures side of things is highly short. In fact, we're sitting on probably one of the largest net short positions in the history of [INAUDIBLE] futures and we see something similar in the 10-year note, basically the market is very aggressively net short.
And sometimes when you get to a point where everyone's already expressed their opinion in the market, those opinions are almost irrelevant because what happens next is at some point-- if everyone's all at one side of the boat-- it doesn't take much to tip it the other way. And we think we're on the verge of something like that happening. And if that's the case, we could see treasuries and stocks move higher. I'm not saying a wild booming bull market in stocks, but people might be surprised at the way the market will be resilient and have the ability to grind higher just simply because shorts are being squeezed out and those that are on the sidelines might start to get a little FOMO as we move a little higher.
J.D. DURKIN: Speaking of surprises, Carley, were there any surprises that are shaping your expectations for the upcoming month of May?
CARLEY GARNER: The biggest surprise to us was how some of the commodity markets failed to react. In general, it's not a perfect relationship-- but, in general, when the US dollar weakens, commodities are generally supported. And we saw some really major commodities-- in fact, two commodities that reacted to the Russia-Ukraine drama last year on the upside, really have had a really rough go of things.
For example, wheat and natural gas are both trading at multi-year lows. And we're just seeing a lot of desperation in those markets on the downside. We think that's going to eventually flip as we go into the later part of the year. Sometimes when markets get overly bullish, like we did last year, it takes a while to work out that froth. And then we actually usually overdo it to the downside and I think that's what's happening.
But what's most important with that statement is it shows us that inflation is probably continuing to weaken. I know that it's still elevated, but with commodities continuing to struggle to hold gains, it should put some downward pressure on inflation as we go forward.
J.D. DURKIN: So we're not going to take a too deep of a dive into any individual earnings reports here but looking at the earnings season as a whole, if we can, as well as how markets have reacted, of course, Carley, how does it stack up with previous reporting periods?
CARLEY GARNER: Generally speaking, when the market comes in with a strong opinion like we did this time-- we came into earnings season with the masses mostly bearish and, like I had mentioned before, a lot of people have already acted on those opinions-- so the market was positioned for lower prices and a weak earnings season. But what we're getting is not necessarily a weak earnings season. It's not great, but it's not a disaster. And sometimes, if everybody's positioned on one side, that's really all it takes.
If it's just not a disaster, that's good enough to stabilize prices and get into a more normal environment. And I think we're seeing signs of that. We're seeing buyers come in on dips. We're seeing the VIX dribble lower and these are all good signs going forward of a little more stability. I mean, we're coming off a couple of years of just wild volatility in both directions. And I think the market's tired and I'm hoping we get back to something like we saw in 2019, where it's just a slow roll and we can all take a little bit of a breather.
J.D. DURKIN: The CBOE Volatility Index, or the VIX, headed lower throughout April until rising sharply just this past few days and then once again wobbling right around the 17 level. What does this tell you heading in to a new month of May, especially when next week's closely watched Fed meeting-- let's not forget, it will be Fed day before we know it.
CARLEY GARNER: I'm of the opinion that we're going into a period of a lack of volatility. I think that the VIX will continue to be under pressure, selling into rallies or not, let's just say, getting bearish-- the VIX on rallies-- is probably the right approach. The VIX has spent most of its time in the 15, 12 area, maybe even a few points above, but the reality is it's rare to see the VIX in the 20s and 30s like we've been accustomed to seeing the last couple of years. So I think that's going to continue to work its way lower and that too will be supportive for stocks.
One thing I want to mention is we always hear the mantra every year we come-- as April's coming to a close-- "sell in May and go away." That really has not worked for quite a while. If you take data over the last five years, that trade would have performed horribly. Over the last five years, it's actually been more of a sell in September or October situation. The markets had summer rallies last handful of years. And I think we're probably setting up for that just given the fact that everybody's short and under allocated and I think that has to change. And as we go into the summer months, there's also light volume. And light volume tends to support the upside.
J.D. DURKIN: Great bit of context there for the popular maxim of "sell in May and go away." On the issue of volatility, Carley, we have a member question for you, if you're game. This week, CBOE launched its one-day volatility index. We got the 30-day already, this is the one-day. How does the VIX D compared to the regular VIX? And is it something that you think will consider following a bit more closely?
CARLEY GARNER: To be honest it's probably not something I'll look at every day. I'll glance at it. I think it's going to be helpful to those traders that are attempting to either speculate or hedge in a very short time frame, we're talking one day, the day of expiration options. So I think it's worth a look, but I think it's also worth noting that it's just a genius marketing tool or marketing ploy by the exchange. The exchange is in the business of giving traders tools to help them succeed and so they've done that with this. And they're also getting their name out and they did it on the 30-year anniversary of the original VIX. So I think it's just a good way to bring exposure and basically bring their products into light. But I don't think it's a game changer when it comes to actually speculating in the markets.
J.D. DURKIN: I can read the subtext there. That's fair. There's always a little bit of showmanship, a bit of PR behind the scene-- not to take away from the legitimacy of it as an asset in terms of helping traders but maybe there's something a little deeper. I appreciate that context.
CARLEY GARNER: It's good business, absolutely.
J.D. DURKIN: Absolutely it is and was something that was talked a lot about the last few days and will continue to be. Before we let you go on this Friday, I would love to get your latest thoughts on crude oil as well as gold, as we close out April trading, and anything else that you may be watching as we head into the new month.
CARLEY GARNER: So the rally that we saw in 2022 in crude oil was really spectacularly unhealthy. It occurred-- it started slowly and then it really went into hyperbolic mode when Russia invaded Ukraine. And we got into a situation where the world was long. In the cash market, everyone was panicking to hoard oil because they didn't if prices were going from $120 to $200 or what the deal was. So we've spent the last several months-- almost year-- working off all of that excess. And I think when oil hit $65 about a month ago, I think that was the capitulation of the mass-- basically liquidation of all those massive bullish positions. And I think that was needed. And now going forward, once we got that out of the way, I think we get back to fundamentals.
And fundamentals tell me, if you have been paying attention to the news, OPEC has a pretty good handle on price control at this point and I think they're guiding the ship. And if that continues to be the case, we should see prices range, somewhere in the low 70s to the mid to high 90s. So I think we're probably looking at some higher prices on the horizon in crude oil. In gold, the two factors that were holding the market back in 2022 were higher interest rates-- and interest rate volatility, quite frankly-- and the higher dollar. And I think both of those things obviously have resolved themselves or are at least starting to.
Interest rates have stabilized-- they're still high, but they're stable. And the US dollar has just had a dismal handful of months here. And I don't think that the dollar actually has to continue to go lower for gold to go higher. I think that just the fact that it's below 105 on the dollar index is enough to open the door for a gold rally. And gold's been knocking on that $2,100 area for a long time. And I think that there's a pretty good chance in 2023 we finally break above that barrier and start headed toward the mid-2000s, but we'll have to see how it goes.
J.D. DURKIN: Of course. As a reminder for our members, the club maintains positions in the Energy Select SPDR Fund and SPDR Gold shares, so we appreciate that check-in at the end of the conversation. That's going to do it. Thanks a lot for being here, Carley. It's wonderful to have you.
CARLEY GARNER: Thank you. It was fun.
J.D. DURKIN: Members, keep an eye on your inbox on Monday, of course, for your full video breakdown of the week ahead. What a week it will be with Fed on the horizon. Have a great weekend. We'll see you then.