A see saw market

Nick Mastrandrea Market Tea Leaves

USD: Mar '25 is Up at 108.615.

Energies: Feb '25 Crude is Up at 72.53.

Financials: The Mar '25 30 Year T-Bond is Up 23 ticks and trading at 114.19.

Indices: The Mar '25 S&P 500 emini ES contract is 160 ticks Higher and trading at 5978.00.

Gold: The Feb'25 Gold contract is trading Up at 2649.00.

Initial conclusion

This is not a correlated market. The USD is Up and Crude is Up which is not 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 Higher which is not correlated. Gold is trading Higher which is not 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 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 mainly Lower with the exception of the Sensex and Singapore exchanges. Europe is trading Mixed.

Possible challenges to traders

Unemployment Claims are out at 9 AM EST. This is Major.
Final Manufacturing PMI is out at 9:45 AM EST. This is Major.
Construction Spending m/m is out at 10 AM EST. This is Major.
Crude Oil Inventories is out at 11 AM 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.

On Tuesday the ZT migrated Higher at around 7 AM EST with no news in sight. The Dow dived Lower at the same time. Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7 AM EST 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 a dozen plus ticks per contract on this trade. Each tick is worth $7.625. Please note: the front month for ZT is now Mar '25 and the Dow is now Mar '25. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of BarCharts

ZT -Mar 2025 - 12/31/24

Dow - Mar 2025- 12/31/24

Bias

On Tuesday we gave the markets a Neutral or Mixed bias and the markets veered to the Downside. The Dow closed Lower by 51 points, and the other indices closed Lower 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

On Tuesday we suggested a Mixed market and the indices started off on a positive footing. However, as the session progressed it became clear that the markets would wind up in negative territory and it did just that. The Dow fell by 51 points and the other indices traded Lower as well. Today we have more economic news with Unemployment Claims starting the session and Crude Oil inventories finishing up.

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.

GBP/USD gains as easing Fed hike bets weigh on US Dollar

GBP/USD continues its winning streak for the ninth consecutive day, trading around 1.3390 during the Asian hours on Tuesday. The currency pair rises as the US Dollar faces headwinds as market participants scale back expectations for Federal Reserve rate hikes this month and in September.

EUR/USD eases toward 1.1400 as Hormuz risks support USD

EUR/USD is easing toward 1.1400 in European trading on Tuesday, facing rejection at the 1.1450 level. The pair loses ground amid a modest recovery in the safe-haven US Dollar, as renewed tensions in the Strait of Hormuz and Asian tech sell-off fuel risk aversion.

Gold sticks to losses as inflation fears lift US bond yields and USD amid Hormuz risks

Gold maintains its offered tone heading into the European session, albeit it holds above the $4,100 mark. Crude oil prices edge higher amid renewed tensions in the Strait of Hormuz, reviving inflationary concerns. This, in turn, triggers a fresh leg up in US Treasury bond yields, offering some support to the US Dollar, and weighing on the non-yielding yellow metal for the second straight day.

Bonk extends correction after $20 million hack from BonkDAO treasury

Bonk remains under pressure, trading below $0.0000044 after losing over 10% in the previous day. Monday’s correction occurred as Bonk Decentralized Autonomous Organization announced a governance exploit that resulted in the theft of $20 million worth of BONK tokens from its treasury.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance, arguing that the current world demands more flexibility.