Trade talks propel markets

USD: Jun '25 is Down at 101.420.  

Energies: Jun '25 Crude is Up at 62.50.

Financials: The Jun '25 30 Year T-Bond is Lower by 7 ticks and trading at 113.09.

Indices: The Jun '25 S&P 500 emini ES contract is 62 ticks Lower and trading at 5849.50.

Gold: The Jun'25 Gold contract is trading Up at 3257.20.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is normal, and the 30 Year T-Bond is trading Lower.  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 Higher 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. All of Asia traded Higher.  All of Europe is trading Higher as well.

Possible challenges to traders

• NFIB Small Business Index is out at 6 AM EST. This is Major.
• Core CPI m/m is out at 8:30 AM EST.  This is Major.
• CPI m/m is out at 8:30 AM EST.  This is Major.
• CPI y/y is out at 8:30 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 climbed Higher at around 7 AM EST with no economic news pending.  The Dow dropped Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7 AM EST and the ZT moved Higher 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 Long opportunity on the 2-year note, as a trader you could have netted a 20 plus ticks per contract on this trade.   Each tick is worth $6.25.  Please note: the front month for ZT is now Jun '25 and the Dow is Jun '25 as well.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

Dow -Jun 2025 - 5/12/25

ZT - Mar 2025- 5/12/25

Bias

Yesterday we gave the markets an Upside bias and the markets didn't disappoint. The Dow gained over 1,000 points on the session and the other indices gained ground as well. Today our bias is to the Downside.

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

Commentary

Sunday evening the news wires were aglow with the news that an agreement had been met between China and the the US regarding trade and tariffs.  The news was the tariffs have been placed on a 90 day hold and the percentages were reduced. China pays 35% and the USA pays 10%. The markets zoomed on the news with the Dow increasing by   1,161 points and the other indices closed Higher as well.