The markets strike back

USD: Sept '25 is Up at 97.705.  

Energies: Aug '25 Crude is Up at 71.76.

Financials: The Sep '25 30 Year T-Bond is Higher by 19 ticks and trading at 113.08.

Indices: The Jun '25 S&P 500 emini ES contract is 105 ticks Lower and trading at 6011.75.

Gold: The Aug'25 Gold contract is trading Down at 3410.10.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not normal, and 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 Lower and Crude is trading Higher which is correlated. Gold is trading Lower 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. Asia traded Higher with the exception of the Singapore exchange which is fractionally Lower.  All of Europe is trading Higher.

Possible challenges to traders

• Core Retail Sales is out at 8:30 AM EST.  This is Major.

• Retails Sales is out at 8:30 AM EST.  This is Major.

• Import Prices m/m is out at 8:30 AM EST.  This is Major.

• Capacity Utilization Rate is out at 9:15 AM EST.  This is Major.

• Industrial Production is out at 9:15 AM EST.  This is Major.

• Business Inventories is out at 10 AM EST.  This is Major.

• NAHB Housing Market Index is out at 10 AM EST.  This is Major.

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.

Yesterday the ZT dived Lower at around 8:30 AM EST with no news 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 climbed Higher at 8:30 AM EST and the ZT dived 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 a dozen 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 - 6/16/25

Dow - Jun 2025- 6/16/25

Bias

Yesterday we gave the markets an Upside bias as the instruments we use for correlation purposes were Lower.  The markets didn't disappoint with the Dow Up 317 points and the other indices closed Higher 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 past Friday all the markets closed Lower due to the geopolitical situation in the Middle East.  The Dow alone dropped 770 by Friday's close so it's not unusual for the markets to rebound.  This it did yesterday with the Dow up 317 points and the other indices up Higher as well.   Want to learn Market Correlation and determine market direction hours before the Opening Bell?