Trade Talk Rally Short Lived

US Dollar: Dec. USD is Up at 97.095.

Energies: Jan '19 Crude is Down at 52.50.

Financials: The Mar 30 year bond is Up 8 ticks and trading at 142.13.

Indices: The Dec S&P 500 emini ES contract is 116 ticks Lower and trading at 2672.25.

Gold: The Dec Gold contract is trading Down at 1241.80.   Gold is 8 ticks Lower than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Up+ and Crude is Down-  which is normal and 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 Lower which is not correlated. Gold is trading Down-  which is correlated with the US dollar trading Higher.  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  Lower with many exchanges trading into negative triple digit territory.  At the current time all of Europe is trading Lower as well.

Possible Challenges To Traders Today

• Challenger Job Cuts y/y is out at 7:30 AM EST. This is major.

• ADP Non-Farm Employment Change is out at 8:15 AM.  Major.

• Revised Nonfarm Productivity is out at 8:30 AM.  This is not major.

• Revised Unit Labor Costs is out at 8:30 AM.  This is not major.

• Trade Balance is out at 8:30 AM EST.  This is major.

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

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

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

• Factory Orders m/m are out at 10 AM EST.  This is major.

• Crude Oil Inventories is out at 11 AM EST.  This is major.

• FOMC Member Bostic Speaks at 12:15 PM 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.

On Tuesday the ZB made it's move at around 8 AM EST.  The ZB hit a Low at around that time and the YM hit a High.  If you look at the charts below ZB gave a signal at around 8 AM EST and the YM was moving Lower at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a Low at around 8 AM and the YM was moving Lower 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 Long opportunity on the 30 year bond, as a trader you could have netted about 30 plus ticks per contract on this trade.  Each tick is worth $31.25.  Please note: the front month for the ZB contract is now March, 2019

Charts Courtesy of MultiCharts built on an AMP platform.

 

Bias

Last Tuesday we gave the markets a Neutral bias as we didn't see any correlation between the indices and the USD. The Dow dropped 799 points and the other indices lost ground 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

It appears as though the trade talks that began over the weekend in Buenos Aires may have been a one day wonder as the Dow dropped about 800 points on Tuesday with the other indices losing ground as well.  Today we have about 13 economic reports, 11 of which will be reported during market hours.  The reason for this is because the NYSE and the Nasdaq were closed yesterday for former President Bush's funeral; so in essence the reports that would have been released on Wednesday have now been diverted to Thursday.