Markets Take a U Turn [Video]

US Dollar: March USD is Down at 95.550.

Energies: Feb '19 Crude is Up at 52.46.

Financials: The Mar 30 year bond is Down 8 ticks and trading at 145.05.

Indices: The Mar S&P 500 emini ES contract is 36 ticks Higher and trading at 2614.50.

Gold: The Feb Gold contract is trading Up at 1291.00.  Gold is 26 ticks Higher than its close.

Initial Conclusion

This is a nearly correlated market.  The dollar is Down- and Crude is Up+  which is normal and 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 Higher and Crude is trading Higher which is not correlated. Gold is trading Higher which is correlated with the US dollar trading Lower.   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 Mixed with half the exchanges Higher and the other half Lower.  Currently most of Europe is trading to the Upside with the exception of the London exchange which is fractionally Lower at this time.

Possible Challenges To Traders Today

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

• NAHB Housing Market Index is out at 10 AM EST.  This is major.

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

• Beige Book is out at 2 PM EST.  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 a major move at around 8 AM EST.  The ZB hit a High at around that time and the YM hit a Low.  If you look at the charts below ZB gave a signal at around 8 AM EST and the YM was moving Higher at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a High at around 8 AM and the YM was moving Higher 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 Shorting opportunity on the 30 year bond, as a trader you could have netted about 15 plus ticks per contract on this trade.  Each tick is worth $31.25.  Please note: the front month for the ZB contract is now March, 2019

Charts Courtesy of MultiCharts built on an AMP platform.

 

Bias

Yesterday we gave the markets a Neutral bias as the USD and Crude were trading Higher Tuesday morning and this usually doesn't bode well for an Upside day, hence the Neutral bias.  The Dow closed 156 points Higher and the other indices traded Higher as well.  Today we are dealing with a nearly correlated market and our bias is to the Upside.

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

Commentary

Yesterday the economic news reported wasn't stellar.  The Empire State Manufacturing Index came in at 3.9 versus 11.6 expected and yet the markets traded Higher.  Economic Optimism didn't exactly meet expectation either, yet the markets traded Higher.  Are we returning to the scenario of one day Lower, next day Higher?  If so that's a dangerous proposition as the markets will do what they will and won't follow what everyone else expects.  From our point of view we will continue to use our rules to determine Market Correlation.