Trade Talks Boosts Markets

US Dollar: Dec. USD is Down at 96.550.

Energies: Jan '19 Crude is Up at 53.89.

Financials: The Dec 30 year bond is Up 26 ticks and trading at 141.11.

Indices: The Dec S&P 500 emini ES contract is 58 ticks Lower and trading at 2776.25.

Gold: The Dec Gold contract is trading Up at 1244.30.   Gold is 46 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 Higher which is 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 mainly Lower with the exception of the Hang Seng and Shanghai exchanges which are Higher.  At the current time all of Europe is trading Lower.

Possible Challenges To Traders Today

• FOMC Member Williams Speaks at 10 AM EST. This is major.

• IBD/TIPP Economic Optimism is out at 10 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 8:30 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 8:30 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 8:30 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 20 plus 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 both the USD and the Bonds were trading Lower Monday morning and this usually represents an Upside bias. The markets didn't disappoint as the Dow rose 288 points and the other indices rose 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

The trade talks that began over the weekend in Buenos Aires at the G20 Meeting bore fruit yesterday.  It was decided to postpone any trade tariffs on Chinese imported goods which was supposed to commence on January 1 for at least another 90 days to determine if a deal could be worked out. Most government officials appear to be optimistic that a deal could be worked out. The NYSE and the Nasdaq will be closed on Wednesday due to former President George H.W. Bush's funeral who passed away last Friday. This was the first former President's funeral in over a decade.