This is not a correlated market. The USD is Up and Crude is Down which is normal, and 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 Higher and Crude is trading Lower which is correlated. Gold is trading Lower which is correlated with the US dollar trading Up. 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 goes Up the other goes Down. All of Asia traded Higher except the Hang Seng and Sensex indices, all of Europe is trading Higher.

Possible challenges to traders

Core PPI is out at 8:30 AM EST. Major.
PPI is out at 8:30 AM EST. Major.
Unemployment Claims is out at 8:30 AM EST. Major.
Natural Gas Storage is out at 10:30 AM EST. Major.
30 year bond auction starts at 1 PM EST. 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 climbed Higher at around 8:30 AM EST with no economic news pending. The Dow dived Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. The ZT climbed Higher at around 8:30 AM EST and the Dow dived Lower 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 $6.25. Please note: the front month for the ZT is now Sep '26. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

Bias

Yesterday we gave the markets a Neutral or Mixed bias and the markets didn't disappoint. The Dow closed Higher by 90 points but the other indices traded Lower on the session. Today our bias is to the Upside.

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

Commentary

It appears as though the truce everyone in DC is talking about hasn't happened as Iran still hasn't come to terms with the United States.

Author

Nick Mastrandrea

Market Tea Leaves

Nick Mastrandrea over 20 years experience in trading and formerly held a NASD Series 7. He currently holds a NJ Life, Health and Variable Authority. Nick is a published writer and his work has appeared in Futures Magazine, TraderPlanet and others.

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