Could market direction change?

USD: Sep '23 is Down at 104.725.

Energies: Oct '23 Crude is Up at 89.68.

Financials: The Dec '23 30 Year T-Bond is Down 8 ticks and trading at 119.13.

Indices: The Sep '23 S&P 500 emini ES contract is 28 ticks Lower and trading at 4535.25. 

Gold: The Dec'23 Gold contract is trading Down at 1929.30. Gold is 32 ticks Lower than its close.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Up which is 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 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 Higher. Currently all of Europe is trading Higher as well.

Possible challenges to traders

• Core PPI m/m is out at 8:30 AM EST. This is Major.

• Core Retail Sales m/m is out at 8:30 AM EST. This is Major.

• PPI y/y is out at 8:30 AM EST. This is Major.

• Retail Sales m/m is out at 8:30 AM EST. This is Major.

• Unemployment Claims is out at 8:30 AM EST. This is Major.

• Business Inventories m/m is out at 10 AM EST. This is Major.

• Natural Gas Storage is out at 10:30 AM EST. This is 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 8:30 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 8:30 AM and the ZN started its Upward migration.  Look at the charts below and you'll see a pattern for both assets. S&P hit a High at around 8:30 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 20 plus ticks per contract on this trade. Each tick is worth $15.625.  Please note: the front month for the ZN is now Dec '23. The S&P contract is now Dec' 23. 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 - Dec 2023 - 9/13/23

S&P - Dec 2023 - 9/13/23

Bias

Yesterday, we gave the markets a Neutral bias and the markets traded Mixed. The Dow dropped 70 points, but the other indices showed a gain for the day. 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 a Neutral bias as we didn't see much in the way of correlation Wednesday morning. The markets traded Mixed with the Dow showing a loss, but the other indices gained on the session. The CPI data came in slightly Higher than expected and this had an effect on the markets.  Today we have PPI data which is Producer Price Index. Think of it as CPI for manufacturers and producers. Could this change market direction? As in all things only time will tell.