Tropical storm doesn’t stop markets

US Dollar: Sept USD Down at 92.985.

Energies: Sept'20 Crude is Up at 42.52.

Financials: The Sept'20 30 year bond is Down 13 ticks and trading at 182.12.

Indices: The Sept S&P 500 emini ES contract is 66 ticks Higher and trading at 3216.50.

Gold: The Aug'20 Gold contract is trading Up at 2051.30 Gold is 303 ticks Higher than its close.

 

Initial Conclusion

This is not a correlated market. The dollar is Down- and Crude is Up+ which is normal and 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 Higher and Crude is trading Higher which is not 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.

At this time Asia is trading mainly Higher with the exception of the Nikkei and Indian Sensex exchanges. Currently all of Europe is trading Higher.

 

Possible Challenges To Traders Today:

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

• Trade Balance is 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 EST. This is Major.

• Crude Oil Inventories is out at 10:30 AM EST. This is Major.

 

Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) and The S&P futures contract. The S&P contract is the Standard and Poor's 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 AM EST. The ZB hit a Low at around that time and the S&P moved Lower. If you look at the charts below ZB gave a signal at around 8 AM EST and the S&P moved Lower at around 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 EST and the S&P was moving Lower shortly thereafter. These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15 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. Please note: the front month for the ZB is now Sept '20. The S&P contract has been changed to Sept '20. I've changed the format to Renko bars such that it may be more apparent and visible.

Charts Courtesy of MultiCharts built on an AMP platform.

 

Bias

Yesterday we gave the markets a Downside bias as the Bonds and Gold were both trading Up and ordinarily this isn't a good sign for an Upside day. The markets however had other ideas as the Dow gained 164 points and the other indices gained ground as well. Today we aren't dealing with a correlated market and our bias is to the Upside.

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

 

Commentary

The markets have shown remarkable resilience throughout a pandemic, an election year, civil unrest and now a tropical storm that ravaged the Northeast yesterday. No doubt many areas (including my own) had to endure rolling power outages which meant equipment had to be reset and calibrated but the markets continue to roll forward.