The Bulls Return

US Dollar: Dec. USD is Down at 96.790.

Energies: Jan '19 Crude is Up at 53.00.

Financials: The Dec 30 year bond is Down 8 ticks and trading at 139.21.

Indices: The Dec S&P 500 emini ES contract is 196 ticks Higher and trading at 2807.00.

Gold: The Dec Gold contract is trading Up at 1235.70. Gold is 97 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 Up+ 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 Asia is trading Higher with some exchanges in positive triple digit territory. All of Europe is trading Higher at this time as well.

Possible Challenges To Traders Today

• FOMC Member Clarida Speaks at 6:30 AM. This is major.

• FOMC Member Quarles Speaks at 8 AM EST. This is major.

• FOMC Member Williams Speaks at 9:15 AM. This is major.

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

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

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

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

• Total Vehicle Sales - ALL Day. This is major.

• FOMC Member Brainard Speaks at 10:30 AM. 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.

On Friday the ZB made it's 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 ticks per contract on this trade. Each tick is worth $31.25.

Charts Courtesy of MultiCharts built on an AMP platform

Bias

On Friday we gave the markets a Downside bias as the USD and the Bonds were trading Higher and this usually reflects a downside day. The markets however had other ideas as the Dow gained 200 points and the other indices gained ground 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

I would appear as though we're heading into the situation whereby we have one day up, next day down. This is inherently dangerous as it allows traders to become very lax with their trading rules and plans. Tim will tell if this is the case. From our point of view we will always follow our rules as they have proved timeless. Today we have 9 economic reports, most of which involve FOMC members speaking; three of which will speak prior to the market open at 9:30 AM EST. The China trade talks have taken front and center for the markets today.