Conference Board Leading Indicators and a slew of FOMC members speaking today

USD: Dec '24 is Up at 103.455.

Energies: Nov '24 Crude is Up at 70.19.

Financials: The Dec '24 30 Year T-Bond is Down 26 ticks and trading at 119.14.

Indices: The Dec '24 S&P 500 emini ES contract is 88 ticks Higher and trading at 5884.00.

Gold: The Dec'24 Gold contract is trading Up at 2750.90.

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 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 Lower with the exception of the Shanghai exchange.  All of Europe is trading Lower. 

Possible challenges to traders

• FOMC Member Logan Speaks at 8:55 AM EST. This is Major.

• CB Leading Index m/m is out at 10 AM EST. This is Major.

• FOMC Member Kashkari speaks at 1 PM EST. This is Major.

• FOMC Member Schmid speaks at 5 PM EST. This is not 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 Friday the ZT migrated Higher at around 8:30 AM EST with no real economic reports at the same time and began its Upward climb.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 AM 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 20 plus ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is Dec and the Dow is now Dec '24.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

ZT -Dec 2024 - 10/18/24

Dow - Dec 2024- 10/18/24

Bias

On Friday we gave the markets an Upside bias as the USD Crude and the Bonds were trading Lower Friday morning and the markets (for the most part) kept its Upside momentum with the Dow gaining 37 points and the other indices gained ground as well. 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

So, we wake up Friday morning to discover that the USD, the Bonds and Crude were all trading Lower.  This to us was a clear indication for an Upside Day especially given the fact that three of the instruments we use for market correlation purposes were all trading Lower. The markets didn't disappoint as all indices closed Higher Friday. Today we have Conference Board Leading Indicators and a slew of FOMC members speaking. Will this continue the positive momentum we've seen in the past few days?  Only time will tell.