The Bulls Stampede

US Dollar: Mar. USD is Down at 89.720.

Energies: Mar '18 Crude is Up at 59.45.

Financials: The Mar 30 year bond is Up 14 ticks and trading at 144.27.

Indices: The Mar S&P 500 emini ES contract is 58 ticks Lower and trading at 2640.75.

Gold: The Feb gold contract is trading Up at 1331.30.  Gold is 49 ticks Higher than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Down- and Crude is Up+  which is 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 Lower and Crude is trading Up+ 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 exchange.  As of this writing all of Europe is trading Lower.

Possible Challenges To Traders Today

• NFIB Small Business Index is out at 6 AM EST.  This is major.

• FOMC Member Mester Speaks at 8 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 10 AM EST with no real  economic news in sight.  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 10 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 10 AM and the YM hit a Low.  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 30 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 gained 410 points and the other indices rose as well.  Today we aren't dealing with a correlated market and our bias is to the Downside.

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

Commentary

Yesterday we gave the markets an Upside bias as both the USD and the Bonds were trading Lower yesterday morning and this is indicative of an Upside Day.  The markets didn't disappoint as the Dow, S&P and Nasdaq all gained ground yesterday.  Today we don't really have much in the way of economic news so the markets will be left to its own devices.