US Doesn’t Join Asian Party

US Dollar: Dec. USD is Down at 95.685.

Energies: Nov '18 Crude is Down at 69.04.

Financials: The Dec 30 year bond is Up 22 ticks and trading at 138.16.

Indices: The Dec S&P 500 emini ES contract is 108 ticks Lower and trading at 2729.50.

Gold: The Dec Gold contract is trading Up+ at 1234.50.   Gold is 99 ticks Higher than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Down- and Crude is Down-  which is not 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 Lower which is not 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 all of Asia is trading Lower.  All of Europe is trading Lower as well.

Possible Challenges To Traders Today

• Richmond Manufacturing Index is out at 10 AM EST.  Major.

• FOMC Member Bostic Speaks at 1:30 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.

Yesterday the ZB made it's move at around 9:30 AM EST.  The ZB hit a High at around that time and the YM hit a Low.  If you look at the charts below ZB gave a signal at around 9:30 AM EST and the YM was moving Higher at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a High at around 9:30 AM and the YM was moving Higher 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 Shorting opportunity on the 30 year bond, as a trader you could have netted about a dozen 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 the USD and Gold were trading Lower yesterday morning.  The markets however had other ideas as the Dow dropped 127 points, the S&P lost 12 but the Nasdaq gained 20.  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 morning it looked very clear for an Upside day.  Both the USD and Gold were trading Lower and ordinarily this would represent an Upside day.  Asia was trading Higher with many exchanges in positive triple digit territory.  Europe was also trading Higher yesterday morning so it would lead you to believe that the US would follow suit.  That however didn't happen.  Whereas the Dow opened Higher initially, after 10 AM it dropped and stayed in negative territory for the remainder of the session.  Today we do have some economic news whereas yesterday we had none.  We have Richmond Manufacturing Index out at 10 AM and later an FOMC Member will be speaking.  Will this be enough to prop up the markets?  Only time will tell....