Weak Eco News Pushes Markets Lower

US Dollar: Dec. USD is Down at 96.415.

Energies: Jan '19 Crude is Down at 49.34.

Financials: The Mar 30 year bond is Up 12 ticks and trading at 143.19.

Indices: The Dec S&P 500 emini ES contract is 26 ticks Higher and trading at 2562.25.

Gold: The Feb Gold contract is trading Up at 1252.50. Gold is 7 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 Higher and Crude is trading Lower 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 all of Asia is trading Lower with many of the exchanges in negative triple digit territory.  Currently  all of Europe is trading Lower as well.

Possible Challenges To Traders Today

• Building Permits is out at 8:30 AM EST.  This is major.

• Housing Starts is out at 8:30 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 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 a dozen 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 gave the markets a Neutral bias as the indices didn't show any sense of direction yesterday morning.  The Dow dropped 507 points and the other indices lost ground 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

Yesterday we gave the markets a Neutral bias which means they could go in any direction.  The economic news came out and it didn't inspire the markets to the upside.  Empire State Manufacturing Index and the NAHB Housing Market Index didn't inspire traders yesterday.  Both came in below expectation and the Dow lost over 500 points.  Today we have Building Permits and Housing Starts, both of which are real estate based and related.  Time will tell if this inspires the markets or not....