Surprise on Friday with the Job numbers – Will this continue?
|USD: Jun '25 is Down at 98.900.
Energies: Jul '25 Crude is Up at 64.80.
Financials: The Sep '25 30 Year T-Bond is Higher by 3 ticks and trading at 112.07.
Indices: The Jun '25 S&P 500 emini ES contract is 18 ticks Higher and trading at 6011.25.
Gold: The Aug'25 Gold contract is trading Down at 3335.80.
Initial conclusion
This is not a correlated market. The USD is Down and Crude is Up which is 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 Higher and Crude is trading Higher which is not correlated. Gold is trading Lower which is not 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 Mixed. Europe is trading mainly Lower with the exception of the Spanish Ibex exchange.
Possible challenges to traders
- Final Wholesale Inventory m/m is out at 10 AM EST. This is Major.
- Lack of Major Economic News.
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.
On Friday the ZT slide Lower at around 8:30 AM EST with Non-Farm Payrolls pending. The Dow climbed Higher at the same time. Look at the charts below and you'll see a pattern for both assets. The Dow moved Higher at 8:30 AM EST and the ZT slide Lower 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 Short 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 $6.25. Please note: the front month for ZT is now Sep '25 and the Dow is still Jun '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 -Sep 25 - 6/06/25
Dow - Jun 2025- 6/06/25
Bias
On Friday we gave the markets a Neutral or Mixed bias as it was Jobs Friday and we always maintain a Neutral bias on that day as well as FOMC Day. The markets were surprised by an increase of 139,000 net new jobs created versus the expectation of 126,000. The markets reacted positively to this news as the Dow rose by 364 points and the other indices rose as well. Today we aren't dealing with a correlated market, and our bias is to the Upside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Commentary
We were pleasantly surprised on Friday with the Job numbers reported as we thought the ADP numbers posted on Wednesday would have a dire effect on the markets. Not so as the indices all gained on the positive news. Will this continue?
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