A small up day is still an up day

USD: Mar '25 is Up at 107.110.  

Energies: Mar '25 Crude is Up at 72.46.

Financials: The Mar '25 30 Year T-Bond is Lower by 15 ticks and trading at 114.06.

Indices: The Mar '25 S&P 500 emini ES contract is 12 ticks Lower and trading at 6143.75.

Gold: The Feb'25 Gold contract is trading Up at 2951.80.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not normal, but the 30 Year T-Bond is trading Lower.  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 Higher which is 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 Shanghai and Sensex exchanges.  All of Europe is trading Lower. 

Possible challenges to traders

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

• Housing Starts is out at 8:30 AM EST.  This is Major.

• FOMC Meeting Minutes is out at 2 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 7:30 AM EST with no economic news reported.  The Dow moved Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 7:30 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 about a dozen 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 - 2/18/25

Dow - Mar 2025- 2/18/25

Bias

Yesterday we gave the markets an Upside bias as we had just completed a three-day holiday weekend in the United States and typically the markets move higher (although not always) after a holiday weekend.  Today we aren't dealing with a correlated market, and our bias is to the Downside.

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

Commentary

Yesterday we suggested an Upside Day but the markets traded Lower until the last few minutes of the session when all three indices closed in positive territory.  This despite the fact that the economic news reported wasn't stellar.  Today we have Building Permits and Housing Starts, both of which are major.   Want to learn Market Correlation and determine market direction hours before the Opening Bell?