The Markets Roar…

US Dollar: Mar. USD is Up at 90.475.

Energies: Feb ’18 Crude is Down at 63.90.

Financials: The Mar 30 year bond is Down 14 ticks and trading at 149.28.

Indices: The Mar S&P 500 emini ES contract is 7 ticks Lower and trading at 2802.00.

Gold: The Feb gold contract is trading Down at 1328.90.  Gold is 103 ticks Lower than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Up+  and Crude is Down-  which is 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 Down- which is not correlated. Gold is trading Down- which is correlated with the US dollar trading Up+.   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 mainly Higher with the exception of the Nikkei and Singapore exchanges which are Lower at this time.  As of this writing Europe is trading Mixed.

Possible Challenges To Traders Today

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

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

• Philly Fed Mfg Index is out at 8:30 AM EST.  This is major.

• Unemployment Claims is out at 8:30 PM EST.  This is major.

• Natural Gas Storage is out at 10:30 AM EST.  Major.

• Crude Oil Inventories is out at 11 AM 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 it’s move at around 10 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 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 20 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 as the Bonds and Gold were both trading Lower yesterday morning and this usually reflects an Upside day.  The markets didn’t disappoint as the Dow soared 323 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

This market seems to have a strategy of one day trade lower and the next day trade much higher going to a higher high.  We predicted that the markets would advance yesterday morning but 323 points in 1 day?  Wow!!!  This is not usual and customary and this is at a time when Bitcoins are losing ground.  Today we have real estate numbers in terms of Housing Starts and Building Permits and that is always major and a proven market mover.