Happy Valentine’s Day

US Dollar: Mar. USD is Down at 89.500.

Energies: Mar '18 Crude is Down at 58.95.

Financials: The Mar 30 year bond is Up 12 ticks and trading at 144.31.

Indices: The Mar S&P 500 emini ES contract is 49 ticks Higher and trading at 2674.00.

Gold: The Feb gold contract is trading Up at 1334.50. Gold is 42 ticks Higher than its close.

Initial Conclusion

This is not a correlated market. The dollar is Down- and Crude is Down-  which is not normal but 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 Down- which is correlated. Gold is trading Up+ 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.

At this hour all of Asia is trading Higher with the exception of the Japanese Nikkei and Singapore exchanges which are Lower.  As of this writing all of Europe is trading Higher.

Possible Challenges To Traders Today

• CPI m/m is out at 8:30 AM EST.  This is major.

• Core CPI is out at 8:30 AM EST.  This is major.

• Core Retail Sales is out at 8:30 AM EST.  This is major.

• Retail Sales is out at 8:30 AM EST.  This is major.

• Business Inventories is out at 10 AM EST.  This is not major.

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

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 8 AM EST with no real  economic news in sight.  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 8 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 8 AM and the YM hit a High.  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 Shorting 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.

Charts Courtesy of MultiCharts built on an AMP platform.

 

Bias

Yesterday we gave the markets a Downside bias but the markets had other ideas. The Dow gained 39 points and the other indices gained ground as well.  Today we aren't dealing with a correlated market however our bias is to the Upside.

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

Commentary

Yesterday we gave the markets a Downside bias as Crude, the Bonds and Gold were all trading higher yesterday morning and this is usually reflective of a Downside day.  Initially the markets did open lower and stayed in negative territory until the afternoon when it finally migrated into positive territory.  Today we have CPI, Core CPI and Retail Sales to contend with and they are all major and proven market movers.