Finally – An up day

USD: Mar '25 is Down at 107.395.

Energies: Mar '25 Crude is Down at 71.85.

Financials: The Mar '25 30 Year T-Bond is Up 17 ticks and trading at 115.09.

Indices: The Mar '25 S&P 500 emini ES contract is 116 ticks Lower and trading at 6036.00.

Gold: The Feb'25 Gold contract is trading Up at 2892.60.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Down which is not normal, but the 30 Year T-Bond is trading Higher.  The Financials should always correlate with the US dollar such that if the dollar is Higher, then the bonds should follow and vice-versa. The S&P is Lower and Crude is trading Lower which is not correlated. Gold is trading Higher which is 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. Asia traded Lower with the exception of the Aussie and Nikkei exchanges.  All of Europe is trading Lower except the London and Ibex exchanges which are Lower. 

Possible challenges to traders

• FOMC Member Barkin Speaks at 7:30 AM EST. This is Major.

• ADP Non-Farm Employment Change is out at 8:15 AM EST. This is Major.

• Trade Balance is out at 8:30 AM EST. This is Major.

• FOMC Member Barkin Speaks at 9 AM EST. This is Major.

• Final Services PMI is out at 9:45 AM EST. This is Major.

• ISM Services PMI is out at 10 AM EST. This is Major.

• Crude Oil Inventories is out at 10:30 AM EST. This is Major.

• FOMC Member Goolsbee Speaks at 2:30 PM EST. This is Major.

• FOMC Goldman Speaks at 3 PM EST. This is Major.

Traders, please note that we've changed the Bond instrument from the 10 year (ZN) to the 2 year (ZT). They work exactly the same.  

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract.  The YM contract is the Dow Jones Industrial Average, and the purpose is to show reverse correlation between the two instruments.  Remember it's likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZT Migrated Higher at around 8 AM EST with no economic news in sight.  The Dow moved Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8 AM EST and the ZT moved Higher at around the same time.  These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better.  This represented a Long opportunity on the 2-year note, as a trader you could have netted about 30 plus ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is now Mar '25 and the Dow is now Mar '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Mar 2025 - 2/04/25

Dow - Mar 2025- 2/04/25

Bias

Yesterday we gave the markets a Neutral or Mixed bias as we saw no evidence of market correlation Tuesday morning.  The markets veered to the Upside with the Dow closing 134 point Higher.  The other indices closed Higher as well.  Today we aren't dealing with a correlated market, and our bias is to the Downside.

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

Commentary

We finally see an Upside Day as opposed to the doldrums we've witnessed recently.  I suppose the Smart Money decided that they wanted an Upside Day for change and moved the markets Higher.  The economic news reported wasn't stellar, so it wasn't economic news that drove the markets Higher.  It could have been the 30-day postponement of tariffs for Mexico, Canada and China.  But we think the Smart Money decided to jump onboard and move the markets Higher.  Today we have Trade Balance numbers and numerous FOMC members speaking, so time will tell market direction.  Want to learn Market Correlation and determine market direction hours before the Opening Bell?