Happy labor day

USD: Sep '23 is Down at 103.560.

Energies: Oct '23 Crude is Up at 84.73.

Financials: The Dec '23 30 Year T-Bond is Down 10 ticks and trading at 121.12.

Indices: The Sep '23 S&P 500 emini ES contract is 60 ticks Higher and trading at 4531.00. 

Gold: The Dec'23 Gold contract is trading Up at 1970.70. Gold is 48 ticks Higher than its close.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, and the 30 Year T-Bond is trading Lower.  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 Higher, and Crude is trading Higher 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 is trading Higher with only the Hang Seng Lower. Currently Europe is trading mainly Higher exception of the German Dax exchange.

Possible challenges to traders

• Average Hourly Earnings m/m is out at 8:30 AM EST. This is Major.

• Non-Farm Employment Change is out at 8:30 AM EST. This is Major.

• Unemployment Rate is out at 8:30 AM EST. This is Major.

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

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

• ISM Manufacturing Prices is out at 10 AM EST. This is Major.

• Construction Spending m/m is out at 10 AM EST. This is Major.

• Wards Total Vehicle Sales is out all day, by brand. This is Major.

Treasuries

Traders, please note that we've changed the Bond instrument from the 30 year (ZB) to the 10 year (ZN). They work exactly the same.  

We've elected to switch gears a bit and show correlation between the 10-year bond (ZN) 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 likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZN migrated Higher at around 10 AM EST as the S&P hit a High at around the same time. If you look at the charts below the S&P gave a signal at around 10 AM and the ZN started its Upward climb. Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 10 AM and migrated Lower. 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 10-year note, as a trader you could have netted about 30 plus ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Sept '23. The S&P contract is now Sep' 23. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.  

Charts courtesy of MultiCharts built on an AMP platform

ZN - Sept 2023 - 8/31/23

S&P - Sep 2023 - 8/31/23

Bias

Yesterday we gave the markets a Downs bias as the indices was correlated that way Thursday morning. The markets didn't disappoint as the Dow closed 168 points Lower, the S&P traded 7 points Lower, but the Nasdaq eked out a slight gain. Today besides being the last trading day prior to a major holiday, it also happens to be Jobs Friday or Non-Farm Payrolls.  As such we will maintain a Neutral bias on this day as historically speaking, the markets have never shown any sense of normalcy on this day.

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

Commentary

Yesterday the markets were correlated to the Downside prior to the Opening Bell and as such our bias was to the Downside. For the most part the markets did trade Lower yesterday with the exception of the Nasdaq that managed a slight gain of about 16 points. Today happens to be the last trading day prior to a major holiday in the United States and it also happens to be Non-Farm Payrolls, which as we all know is major and a proven market mover. This being said we will still maintain a Neutral bias on this day as is customary for us as we have never seen normalcy on Jobs Friday.  We do wish all of you a very Happy Labor Day holiday as we've all earned it this year.