Can building permits and housing starts sustain market momentum?

USD: Mar '24 is Up at 103.545.

Energies: Apr '24 Crude is Down at 82.01.

Financials: The June '24 30 Year T-Bond is Up 8 ticks and trading at 118.14.

Indices: The Mar '24 S&P 500 emini ES contract is 88 ticks Lower and trading at 5193.00.

Gold: The Apr'24 Gold contract is trading Down at 2158.90  

Initial conclusion

This is a nearly 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 Lower and Crude is trading Lower which is not 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 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 is trading Lower with the exception of the Singapore and Nikkei exchanges which are Higher.  Currently all of Europe is trading Higher except the London exchange.  

Possible challenges to traders

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

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

• TIC Long-Term Purchases is out at 4 PM EST.  This is not Major.

Treasuries

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

We've elected to switch gears a bit and show 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 migrated Higher at around 9:10 AM EST as the S&P hit a High at around the same time.  If you look at the charts below the S&P gave a signal at around 9:10 AM and the ZN started its Upward climb.  Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 9:10 AM and migrated Lower.  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 a dozen ticks per contract on this trade.   Each tick is worth $15.625.  Please note: the front month for both the ZN and the S&P are now Jun '24.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.  

Charts courtesy of MultiCharts built on an AMP platform

ZN -Jun 2024 - 03/18/24

S&P - Mar 2024 - 03/18/24

Bias

Yesterday we gave the markets an Upside bias as both the USD and the Bonds were trading Lower Monday morning and that usually represents an Upside Day.  The markets didn't disappoint as the Dow gained 76 points on the session and the other indices gained ground as well.  Today we are dealing with a nearly correlated market and our bias is to the Downside.

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

Commentary

Finally, we get an Upside session after days of being in the doldrums with Down days, we finally get an Upside Day.  It certainly wasn't economic news that drove it Higher as we only had one report for the day, that being the NAHB index which showed a positive gain.  Today we have Building Permits and Housing Starts both of which are Major and proven market movers.  Will this be enough to maintain the positive ground gained yesterday?  Only time will tell.....