August starts with a thud [Video]

US Dollar: Sept '21 USD is Down at 92.000.

Energies: Sept '21 Crude is Up at 71.79.

Financials: The Sept '21 30 Year bond is Down 12 ticks and trading at 165.20.

Indices: The Sept '21 S&P 500 emini ES contract is 60 ticks Higher and trading at 4394.75. 

Gold: The Aug'21 Gold contract is trading Down at 1812.10.  Gold is 101 ticks Lower than its close.

Initial conclusion

This is not a correlated market. The dollar is Down- and Crude is Up+ which is normal and the 30 year Bond is trading Lower. The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The S&P is Higher and Crude is trading Higher which is not correlated. Gold is trading Lower which is not 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.  All of Asia is trading Lower at this time with the exception of the Indian Sensex which is Lower.   Currently, all of Europe is trading Higher.

Possible challenges to traders today

• Factory Orders m/m is out at 9:45 AM EST. This is Major.

• IBD/TIPP Economic Optimism. This is Major.

• Wards Total Vehicle Sales is out All Day by Brand. This is Major.

• FOMC Member Bowman Speaks at 2 PM EST. This is Major.

Treasuries

Traders please note that we've changed the Bond instrument from the 30 years (ZB) to the 10 years (ZN).  They work exactly the same.  

We've elected to switch gears a bit and show a correlation between the 10-year bond (ZN) and The S&P futures contract.  The S&P contract is the Standard and Poor's 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 ZN made its move at around 10:30 AM EST.  The ZN hit a Low at around that time and the S&P moved Lower.  If you look at the charts below ZN gave a signal at around 10:30 AM EST and the S&P moved Lower at around the same time.  Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 10:30 AM EST and the S&P was moving Lower shortly thereafter.  These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15-minute chart to display better.  This represented a Long opportunity on the 10-year note, as a trader you could have netted about 20 ticks per contract on this trade.   Each tick is worth $15.625.  Please note: the front month for the ZN is now Sept '21.  The S&P contract is also Sept '21.  I've changed the format to Renko bars such that it may be more apparent and visible.  

Charts Courtesy of MultiCharts built on an AMP platform

ZN - Sept 2021 - 8/02/21

S&P - Sept 2021 - 8/02/21

Bias

Yesterday we gave the markets an Upside bias as the USD, Crude and Gold were all pointed Lower Monday morning, and that usually represents an Upside day. The markets however had other ideas as the Dow dropped 97 points, the S&P lost 8 but the Nasdaq did manage to gain  8 points on the session. Today we aren't dealing with a correlated market and our bias is to the Upside.

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

Commentary

Yesterday we gave the markets an Upside bias as the indices were correlated in that direction. However, at 10 AM EST economic reports came out that were not very stellar, and starting from that point the markets began their slide. ISM Manufacturing PMI, Construction Spending, and ISM Manufacturing Prices came out that did not meet expectations. Chief amongst those was Construction Spending that came in at 0.1% versus 0.4% expected. This time of the year we expect construction spending to be booming as it is summer and usually that is what happens in warm weather. Not so this time around and let's be reminded that real estate and anything related to it is still major and a proven market mover.  Today we have Factory Orders and Total Vehicle Sales so perhaps this could stimulate the markets.  But as in all things, only time will tell...