When Powell speaks, markets listen [Video]
|US Dollar: Dec '20 USD Down at 89.740.
Energies: Apr'21 Crude is Up at 63.32.
Financials: The Mar '21 30 year bond is Down 41 ticks and trading at 160.08.
Indices: The Mar'21 S&P 500 emini ES contract is 10 ticks Lower and trading at 3920.00.
Gold: The April'21 Gold contract is trading Down at 1792.10. Gold is 58 ticks Lower 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 Lower and Crude is trading Higher which is correlated. Gold is trading Lower which is not 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 is trading Higher. Currently all of Europe is trading Higher as well with the exception of the German Dax which is fractionally Lower at this time.
Possible challenges to traders today
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Prelim GDP is out at 8:30 AM EST. This is Major.
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Core Durable Goods Orders is out at 8:30 AM EST. This is Major.
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Durable Goods is out at 8:30 AM EST. This is Major.
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FOMC Member Bostic Speaks at 8:30 AM EST. This is Major.
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Prelim GDP Price Index is out at 8:30 AM EST. Major.
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Unemployment Claims is out at 8:30 AM EST. Major.
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Pending Home Sales is out at 10 AM EST. This is Major.
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Natural Gas Storage is out at 10:30 AM EST. This is Major.
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FOMC Member Quarles Speaks at 11:10 AM EST. Major.
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FOMC Member Bostic Speaks at 12 Noon EST. This is Major.
Bias
Yesterday we gave the markets an Upside and finally the markets cooperated. The Dow closed Higher by 425 points, The S&P gained 44 and the Nasdaq gained 133. 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 was Day Two of Fed Chairman Powell's testimony to a Congressional Committee and in it he basically stated his continued cooperation for a sustained period of easing for interest rates which is a key driver for Consumer Spending in the United States. Consumer Spending represents about 70% of GDP in the US economy and the Chairman and his members seemed intent on keeping it low for an extended period of time. The markets took this as positive news and exploded to the Upside. Today we have about 10 economic news reports, all of which are major; so we will see if this upward momentum can continue.
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