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 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 Higher which is 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 traded Mixed. Currently all of Europe is trading Higher.

Possible challenges to traders

Empire State MFG Index is out at 8:30 AM EST. This is Major.
NAHB Housing Market Index out at 10 AM EST. This is Major.
FOMC Member Barr Speaks at 12:45 PM EST. This is Major.
FOMC Member Daly Speaks at 2:45 PM EST. This is Major.
Cleveland Fed Inflation Expectations is tentative. 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.

On Friday the ZT climbed Higher at around 8:30 AM EST awaiting CPI data. 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 8:30 AM EST and the Dow dived Lower 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 $6.25. Please note: the front month for the ZT and YM are both Mar '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

Last Friday we gave the markets a Neutral or Mixed bias and the markets didn't disappoint as the Dow closed Higher by 50 points, but the Nasdaq dropped 50. So, all in all it was a Mixed Day. 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

The day before a major holiday we get CPI data which is clearly a market mover, but what seems to be of concern to most traders today is AI. As someone who has spent a number of years in the tech sector, their fear is not unfounded. The key factor with US industry is the cost of labor and Artificial Intelligence (AI) appears to be the cornerstone for labor saving.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD tests 1.1800 barrier above 50-day EMA

EUR/USD gains ground after three days of losses, trading around 1.1790 during the Asian hours on Thursday. The 14-day Relative Strength Index momentum indicator at 47 (neutral) reflects easing momentum. The RSI below 50 keeps momentum balanced and could limit follow-through.

GBP/USD struggles near four-week low vs. USD, below 1.3500 amid BoE rate cut bets

The GBP/USD pair is seen consolidating its weekly losses registered over the past three days and oscillating in a narrow range near a four-week trough, touched during the Asians session on Thursday. Spot prices currently trade just below the 1.3500 psychological mark and seem vulnerable to slide further.

Gold consolidates below $5,000 amid geopolitical risk, hawkish FOMC Minutes

Gold extends its sideways consolidative price move through the Asian session on Thursday and remains below the $5,000 psychological mark as traders seem hesitant amid mixed cues. The US Dollar preserves its strong gains to over a one-week high in the wake of somewhat hawkish Minutes of the US Federal Reserve’s January monetary policy meeting.

Injective token surges over 13% following the approval of the mainnet upgrade proposal

Injective price rallies over 13% on Thursday after the network confirmed the approval of its IIP-619 proposal. The green light for the mainnet upgrade has boosted traders’ sentiment, as the upgrade aims to scale Injective’s real-time Ethereum Virtual Machine architecture and enhance its capabilities to support next-generation payments. The technical outlook suggests further gains if INJ breaks above key resistance.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.