Downside Bias = Downside Day

US Dollar: Dec. USD is Up at 95.375.

Energies: Oct '18 Crude is Down at 74.64.

Financials: The Dec 30 year bond is Down 9 ticks and trading at 137.14.

Indices: The Dec S&P 500 emini ES contract is 18 ticks Lower and trading at 2883.50.

Gold: The Dec Gold contract is trading Down at 1190.20. Gold is 13 ticks Lower than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Up+ and Crude is Down-  which is normal but the 30 year Bond is trading Lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The S&P is Lower and Crude is trading Lower which is not correlated. Gold is trading Down- which is correlated with the US dollar trading Higher.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders you need to be aware of this and proceed with your eyes wide open.

At this hour Asia is trading mainly Higher with the exception of the Aussie and Singapore exchanges which are Lower. Currently all of Europe is trading Lower.

Possible Challenges To Traders Today

• PPI m/m is out at 8:30 AM EST.  Major.

• Core PPI m/m is out at 8:30 AM EST.  Major.

• Final Wholesale Inventories is out at 10 AM EST.  Major.

• 10-y Bond Auction starts at 1 PM EST.  This is major.

• Treasury Currency Report - tentative

 Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) and The YM futures contract.  The YM contract is the DJIA and the purpose is to show reverse correlation between the two instruments.  Remember it's liken to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZB made it's move at around 11:30 AM EST.  The ZB hit a Low at around that time and the YM hit a High.  If you look at the charts below ZB gave a signal at around 11:30 AM EST and the YM was moving Lower at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a Low at around 11:30 AM and the YM was moving Lower at the same time.  These charts represent the newest version of MultiCharts and I've changed the timeframe to a 30 minute chart to display better.  This represented a Long opportunity on the 30 year bond, as a trader you could have netted about a dozen ticks per contract on this trade.  Each tick is worth $31.25.

Charts Courtesy of MultiCharts built on an AMP platform.

 

Bias

Yesterday we gave the markets a Downside bias as Gold, Crude and the USD were all pointed Higher yesterday morning and this bodes well for a Downside day.  The Dow dropped 56 points, the S&P lost 4 and the Nasdaq gained 2.  Today we aren't dealing with a correlated market and our bias is Neutral.

Could this change? Of Course. Remember anything can happen in a volatile market. 

Commentary

Yesterday morning Gold, the USD and Crude were all trading Higher and this usually reflects a Downside day.  The markets didn't disappoint as they dropped during the session with only the Nasdaq showing a slight gain.  Today we have PPI which is major and a proven market mover.  Why? Because the Federal Reserve uses this number ( along with CPI) to determine if inflation is forthcoming or benign.