This is not a correlated market. The USD is Down and Crude is Down which is not normal, but the 30 Year T-Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is Higher, then the bonds should follow and vice-versa. The S&P is Lower and Crude is trading Lower 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. Asia traded Lower with the exception of the Nikkei exchange. Europe is trading mainly Lower with the exception of the German Dax and Spanish Ibex exchanges.

Possible challenges to traders

Empire State Manufacturing Index is out at 8:30 AM EST. This is Major.
FOMC Member Daly Speaks at 11:30 AM EST. This is Major.
FOMC Member Kugler Speaks at 1 PM EST. This is Major.

Traders, please note that we've changed the Bond instrument from the 10 year (ZN) to the 2 year (ZT). They work exactly the same.

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract. The YM contract is the Dow Jones Industrial Average, and the purpose is to show reverse correlation between the two instruments. Remember it's likened to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZT migrated Higher at around 8:30 AM EST with no economic news in sight and began its Upward Climb. Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM and the ZT moved Higher at around the same time. These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 2-year note, as a trader you could have netted about 20 plus ticks per contract on this trade. Each tick is worth $7.625. Please note: the front month for ZT is Dec and the Dow is now Dec '24. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Dec 2024 - 10/14/24

Dow - Dec 2024- 10/14/24

Bias

Yesterday we gave the markets an Upside bias as Crude, The Bonds and Gold were all trading Lower Monday morning and that usually bodes well for an Upside Day. The markets didn't disappoint as the Dow traded Higher by 201 points and the other indices closed Higher as well. Today we aren't dealing with a correlated market and our bias is Neutral or Mixed.

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

Commentary

Yesterday was a bank holiday so the banks were closed but the stock market was open and of course no mail was delivered on a federal holiday. We came to an Upside conclusion because 3 of the instruments we use for Market Correlation purposes was pointed Lower, so we used our rules of market correlation which did not fail us. Today we have Empire State Manufacturing Index and a couple of FOMC members speaking; these are all major and proven market movers. Will they serve to keep Upward momentum moving forward? Only time will tell..

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD keeps its focus on 1.1800

EUR/USD is holding its ground near two-day highs around 1.1750 as Thursday’s session is drawing to a close. The pair is drawing support from a more constructive risk mood, helped by easing EU–US trade tensions and a softer US Dollar. Looking ahead, attention shifts to Friday’s flash PMI releases from both Europe and the US.

GBP/USD flirts with 1.3500 on persistent USD selling

GBP/USD is regaining momentum on Thursday and pushing up towards two-week highs around the 1.3500 mark. In the process, Cable is leaving Wednesday’s brief wobble behind and slipping back into its upward trend, helped by ongoing selling pressure on the Greenback ahead of key advanced PMI data on Friday.

Gold continues scaling new record highs, climbs above $4,950

Gold extends its record-setting rally for the fifth consecutive day on Friday, as persistent geopolitical uncertainties continue to drive safe-haven flows. Meanwhile, expectations for further policy easing by the Federal Reserve contribute to the de-dollarization trend and further underpin the non-yielding bullion, which remains on track to register gains for the third successive week and appears unaffected by extremely overbought conditions.

Bank of Japan expected to hold rates, markets seek clues on further tightening

The Bank of Japan is expected to leave its benchmark interest rate unchanged at 0.75% after concluding its two-day monetary policy meeting next Friday. The Japanese central bank hiked rates to its highest level in three decades in December, and will likely stand pat on Friday to better assess the economic consequences of previous rate hikes.

Trump walks back NATO tariffs, signals de-escalation

What began as a sharp escalation risk quickly turned into a de-escalation signal. Earlier this week, markets briefly priced in escalation risk after Donald J. Trump proposed a 10% tariff hike on eight NATO nations amid the Greenland dispute.

XRP defends $1.90 support as ETFs attract inflows despite retail caution

Ripple (XRP) is consolidating above $1.90, a short-term support level, at the time of writing on Thursday. This mild uptick marks two consecutive days of a strengthening technical outlook, following recent market-wide volatility.