As suggested a down day

Nick Mastrandrea Market Tea Leaves

USD: Dec '26 is Up at 101.665.

Energies: Dec '26 Crude is Down at 101.52.

Financials: The Dec '26 30 Year T-Bond is Higher by 2 ticks and trading at 107.10.

Indices: The Sep '26 S&P 500 emini ES contract is 96 ticks Higher and trading at 7683.75.

Gold: The Dec'26 Gold contract is trading Up at 4030.20.

Initial conclusion

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 Up 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 goes Up the other goes Down. Asia traded Mixed. Europe is trading Mixed as well.

Possible challenges to traders

No Major Economic News.
Lack of Major economic news.

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 Friday the two year dived climbed Higher at around 8 AM EST with no major 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 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 Dec '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

On Friday as predicted the markets dived Lower. The Dow dropped 653 points, and the other indices lost ground as well. Today our bias is to the Upside.

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

Commentary

On Friday we suggested a Down day for the markets and the markets didn't disappoint. All we did was to use our rules of Market Correlation to make that determination.

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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