JD DURKIN: A very good Friday morning to all subscribers. AAP team member Carley Garner joins me now for her take on this week's trading and a look at the commodities market. Carley, thank you for being here. It's great to have you. I'd love to kick off the conversation, of course, with kind of a look at the week that was despite Fed Chair Powell shaking things up the last couple of days. Generally, a bit of a slower holiday shortened week. What stood out to you these last few trading sessions?
CARLEY GARNER: It's been kind of interesting. Last week was kind of the perfect storm for a short squeeze. We had a triple witching on Friday. We were going into a holiday weekend. And just a couple of weeks ago in the futures market, we were looking at one of the-- actually, not one of. The largest net short position ever in the history of the e-mini S&P futures. So everybody was loaded up on the bear side. And going into holiday weekend triple witch, it all kind of blew up.
Nothing good was going to happen to anyone that was heavily short. And we saw a short squeeze. That short squeeze allowed the market to kind of trade out of bounds. We had been trading in a range, like a trading channel. It was an uptrend in channel, but it was sloppy, that started in October of last year. And it's been continued. We broke out of that on Friday on the short squeeze.
But I have a feeling that that might be a bit of a fake breakout. We'll know today if today we see the S&P close above-- I'm sorry, close above or below about 4,400, we'll be able to see if that breakout was valid or if we're just going to fall right back into the range. If we fall back into the range, I think we could get a healthy correction. I'm not necessarily bearish, but corrections are healthy. And those corrections can be pretty steep.
I wouldn't be shocked to see 4,000 to 4,100 on a pullback.
JD DURKIN: So that's what I was going to ask, because right now as we're having this conversation, it's right about 4,350. One more time for those numbers on that range just for a bit of context for our viewers?
CARLEY GARNER: Sure. Yeah, absolutely. So 4,400 is the number I'm looking at now. This is versus the S&P futures, not the stock index. So you can probably shave about 20 points off of that to apply it to SPI or SPX.
JD DURKIN: All right, fair enough. We've run this interesting case when we've been talking about this for a long time, right? When the Fed speaks, despite the fact we say don't fight the Fed, sometimes Fed Chair Powell speaks and the markets kind of shake it off, maybe don't necessarily believe what he's saying. I wonder if given this kind of accentuated back and forth the last week and a half or so, is there anything you think we're not paying enough attention to, Carley?
CARLEY GARNER: So a couple of things I'm going to note. One may be a little off topic. I don't think I'm a fan of all the transparency. When I first got into the business, there wasn't a lot of Federal Reserve transparency. And honestly, I think things worked a little more rationally.
So now we're getting people reacting to every single word that comes out. That said, I think that what we need to pay attention to is market positioning. Just a few minutes ago, I mentioned that we are coming off the largest net short position in the history of S&P futures. But I think, and I won't know till today, the COT report-- by the way, the COT report is the Commitment to Traders report. It's issued by the CFTC. So it's a government agency that issues a report telling us who's long and who's short and by how much.
That report comes out today based on Tuesday's data. So that's going to tell us whether or not that short squeeze last week was enough to kind of reset the market. And I think it was. I'm kind of guessing here, but my guesswork is telling me that about half of that net short position has been liquidated. And if so, that's a nice reset and it gives a lot of-- basically, it creates a scenario where for the market to hold these prices, the buying has to come from the bulls getting in, not the bears getting out.
And I'm not sure we can do that in the short run. So I expect a little more weakness. But again, I don't think it's the end of the world. Corrections are healthy.
JD DURKIN: All right, well speaking of resets, let's talk about the Russell reset, or the refresh, or the reconstitution. Whichever cool word you'd like to use. Something we don't talk an awful lot about is the yearly rebalancing. The FTSE Russell it's set to be finalized after today's closing bell.
How significant is a day like that on your radar? And what should people if they're only hearing about it for the first time?
CARLEY GARNER: Each and every year it does move the market. It usually gets some hanky panky going on near the close. To be honest, I'm not an expert on the Russell rebalancing. It's a little outside my wheelhouse. But what I can say is the Russell's usually a market leader. Usually, the Russell leads the market up or down.
This time around that's not the case. We've had the NASDAQ and the S&P far outperform the Russell on the back of a couple of tech stocks. And some will argue that maybe this means the Russell is going to pull the other indices down. But I actually think it's the opposite. I think at some point the stronger indices are going to pull the Russell up. And if you look at the components that are holding the Russell down, it's bank stocks and energies. And I think that the energy complex, at least on the commodity side, probably has a probability of going higher into the year end as opposed to lower. We're kind of in troughs in those energy commodities.
And if you look at interest rates, the Treasury market has stabilized. And that should give the banks a little time to reset. So again, I think that there's a good chance the Russell is a actually a lagging indicator at this point and it follows the rest of the market higher later into the year.
JD DURKIN: Carley, you've been noting recently on real money that markets have gotten a little excited to the upside on renewable commodities. Corn and cattle, two good examples. Can you explain how commodities trade differently than stocks and how that price variation can impact the companies that rely on raw materials to create those products?
CARLEY GARNER: I hate to say this because I'm a commodity broker and I make a living in that arena. But the commodities at times are a little like the Wild West. The products are leveraged, so you get a lot of speculators. And some of those speculators are basically using too much margin too aggressively. So you get bigger price swings. Also, what happens in commodities is they don't pay dividends, they don't pay interest, they're renewable. So there's not a limited supply in the long run for most of them, not all of them. But that's a general rule.
So the result of that is they don't trade in an upward trajectory like we see in stocks. They trade sideways. Even with inflation, they trade sideways and they have some pretty good sell-offs for example. Just since I've been in the business, I've seen crude oil start around $20 a barrel, get up to $150 a barrel, and then go negative a handful of years later. So anything can happen in commodities. It obviously impacts businesses.
Hopefully, businesses are hedging properly. That's really the name of the game. We forget that. But futures and options created as a hedging tool, not a speculative tool. But the thing to keep in mind is, and this is the good news, although commodities trade sideways and they can be very volatile, in the bigger picture, they are in bear markets more often they're in bull markets. The last couple of years, you've heard a lot about commodities are hitting headlines. And that's because it's one of those rare bull market times. But it's not always like that. It's usually bear market territory in commodities. And that's good for most businesses, obviously.
All right, I appreciate the context there. Now, this week natural gas saw its biggest drop since the month of March, Carley. What is your outlook for natural gas heading into slower summer months. And of course, as a reminder to our members, the club has a position in the Energy Select SPDR Fund.
CARLEY GARNER: In the big picture, $2.00, $2.50, $3.00 natural gas is really cheap. So I'm a long-term bull. But if we're talking about short run, seasonality natural gas tends to weaken over the next several weeks. And that's because going into the summer months, the energy companies basically hoard natural gas and they build up their stockpiles ahead of the air conditioning season. And then they do the same in the winter. So the seasonal up move comes before the natural gas is needed in our homes as opposed to after or during.
So with that in mind, I think that $2.80 is probably a ceiling for natural gas. In the short run, I think we probably sell off a little from there. But I think we're in the process of bottoming. So if we're talking over the next six months to a year, I think these are going to be good opportunities for the upside.
JD DURKIN: Carley, it's great to have you. Happy Friday.
CARLEY GARNER: Thank you.
JD DURKIN: Happy Russell day. And have a great weekend.
CARLEY GARNER: You, too. Thank you.
JD DURKIN: Appreciate your perspective. Chris Versace, folks, and I will be back on Monday to get you ready for the week ahead. Have a great weekend until we see you again. We'll see you Monday.