One Day Down, Next Day Up

US Dollar: Dec. USD is Up at 94.860.

Energies: Nov '18 Crude is Up at 72.17.

Financials: The Dec 30 year bond is Down 4 ticks and trading at 138.12.

Indices: The Dec S&P 500 emini ES contract is 10 ticks Lower and trading at 2815.25.

Gold: The Dec Gold contract is trading Down- at 1227.70. Gold is 35 ticks Lower than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Up+ and Crude is Up+  which is not normal but 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 Lower and Crude is trading Higher which is correlated. Gold is trading Down-  which is correlated with the US dollar trading Higher.   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 Indian Sensex which is Lower at this time.  Currently Europe is trading Higher with the exception of the German Dax and Spanish IBEX exchanges which are Lower at this time.

Possible Challenges To Traders Today

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

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

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

• FOMC Member Brainard Speaks at 12:10 AM.  This is major.

• FOMC Meeting Minutes are out at 2 PM EST.  This is major.

• Treasury Currency Report is out.  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 9:30 AM EST.  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 9:30 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 9:30 AM and the YM was moving Lower 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 Long opportunity on the 30 year bond, as a trader you could have netted about a dozen 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 an Upside bias and the markets didn't disappoint.  The Dow leaped  548 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

We're starting to see a pattern that we haven't seen in a while whereby one day the market retreats and then the next day the markets advance dramatically.  As traders we need to be careful when the market does this as it could lead us into a false sense of expectation.  Expectation that may or may not be realized.  From our perspective we will do what we do each and every day and that is to use our rules of market correlation to determine direction.