Upside Continues [Video]

US Dollar: March USD is Up at 95.745.

Energies: Feb '19 Crude is Down at 51.90.

Financials: The Mar 30 year bond is Up 12 ticks and trading at 145.18.

Indices: The Mar S&P 500 emini ES contract is 43 ticks Lower and trading at 2602.50.

Gold: The Feb Gold contract is trading Down at 1293.50. Gold is 3 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 Lower 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 the exception of the Indian Sensex exchange which is Higher at this time.  Currently all of Europe is trading Lower.

Possible Challenges To Traders Today

• Philly Fed Mfg Index is out at 8:30 AM EST.  This is major.

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

• Nat Gas Storage is out at 10:30 AM EST.  Major.

• FOMC Member Quarles Speaks 10:45 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 a major move at around 9 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 9 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 9 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.  Please note: the front month for the ZB contract is now March, 2019

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 yesterday morning and this is indicative of an Upside day.  The markets didn't disappoint as the Dow gained 142 points and the other indices gained 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

Yesterday the economic news reported came in a bit better than Tuesday as the NAHB Housing Market Index came in at 58 versus an expectation of 56.  This shows that the US market is still very much judged by the strength of housing and real estate in general.  Today we have Philly Fed Manufacturing Index which is a major report and a proven market mover along with Unemployment Claims which is usual for a Thursday.