Downside Bias = Downside Day

US Dollar: Dec USD is Down at 97.660.

Energies: Nov '19 Crude is Down at 53.04.

Financials: The Dec 30 year bond is Up 1 tick and trading at 160.09.

Indices: The Dec S&P 500 emini ES contract is 13 ticks Higher and trading at 2994.50.

Gold: The Dec Gold contract is trading Down at 1492.50.   Gold is 15 ticks Lower than its close.

 

Initial Conclusion

This is not a correlated market.  The dollar is Down- and Crude is Down- which is not normal and the 30 year Bond is trading Higher.  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 Higher and Crude is trading Lower which is correlated. Gold is trading Lower which is not correlated with the US dollar trading Down.   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 time Asia is trading Mixed with half the exchanges Higher and the other half Lower.  Currently all of Europe is trading Higher.  

 

Possible Challenges To Traders Today

• Philly Fed Manufacturing Index is out at 8:30 AM EST.  This is major.

• Building Permits is out at 8:30 AM.  This is major.

• Housing Starts is out at 8:30 AM EST.  This is major.

• Unemployment Claims is out at 8:30 AM EST.  This is major.

• Industrial Production m/m is out at 9:15 AM EST.  This is major.

• Capacity Utilization Rate is out at 9:15 AM EST.  This is major.

• Natural Gas Storage is out at 10:30 AM EST.  This is major.

• Crude Oil Inventories is out at 11 AM EST.  This is major.

• FOMC Member Bowman Speaks at 2 PM EST.  This is major.

• FOMC Member Evans Speaks at 2 PM EST.  This is major.

• Federal Budget Balance is out at 2 PM EST.  This is major.

• FOMC Member Williams Speaks at 4:20 PM.  No impact on session.

 

Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) and The S&P futures contract.  The S&P contract is the Standard and Poor's 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 a major move at around 9 AM EST.  The ZB hit a Low at around that time and the S&P hit a High.  If you look at the charts below ZB gave a signal at around 9 AM EST and the S&P 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 9 AM and the S&P was moving Lower at the same time.  These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15 minute chart to display better.  This represented a Long opportunity on the 30 year bond, as a trader you could have netted about 15 ticks per contract on this trade.  Each tick is worth $31.25.  Please note: the front month for the ZB is now December.  The S&P contract is now at December as well and I've changed the format to Renko bars such that it may be more apparent and visible.

 

Charts Courtesy of MultiCharts built on an AMP platform.

 

 

Bias

Yesterday we gave the markets a Downside bias as both the USD and the Bonds were trading Higher yesterday morning and this is generally indicative of an Upside Day.  The markets didn't disappoint as the Dow gained 237 points and the other indices gained ground as well.  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 reading the market tea leaves wasn't as easy as we would like as the USD flip flopped between negative and positive territory.  Ordinarily we would like to see clear signs of correlation but yesterday it wasn't that clear.  We did believe that the USD would lose ground (as it eventually did).  Today we have about 12 major economic reports with three FOMC members speaking so today will have its own set of challenges.  From our point of view we will just stick to our rules of market correlation that has served us well.