Crisis averted

USD: Jun '23 is Up at 104.260.

Energies: Jul '23 Crude is Up at 73.05.

Financials: The Sep '23 30 Year T-Bond is Down 26 ticks and trading at 127.04.

Indices: The Jun '23 S&P 500 emini ES contract is 4 ticks Higher and trading at 4289.00.

Gold: The Aug'23 Gold contract is trading Down at 1960.00. Gold is 96 ticks Lower than its close.

Initial conclusion

This is not a correlated market. The USD is Up, 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 Higher, and Crude is trading Higher 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. At the present time all of Asia is trading Higher. Europe is trading Mixed.

Possible challenges to traders today

Final Services PMI is out at 9:45 AM EST. This is Major.
ISM Services PMI is out at 10 AM EST. This is Major.
Factory Orders m/m is out at 10 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.

On Friday the ZN migrated Lower at around 10 AM EST as the S&P hit a Low at around the same time. If you look at the charts below the ZN gave a signal at around 10 AM and the ZN continued its Downward trend. Look at the charts below and you'll see a pattern for both assets. S&P hit a Low at around 10 AM and migrated Higher. 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 Short opportunity on the 10-year note, as a trader you could have netted about 60 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Jun '23. The S&P contract is also Jun' 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 - Jun 2023 - 6/02/23

S&P - Jun 2023 - 6/02/23

Bias

On Friday we gave the markets a Neutral or Mixed bias as it was Jobs Friday. The markets migrated to the Upside based on the economic news (Jobs numbers) reported. The Dow gained 701 points and the other indices gained ground as well. Today we aren't dealing with a correlated market and our bias is Neutral or Mixed.

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

Commentary

I appears that the Senate liken to the House of Representatives passed the debt ceiling measure by a vote of 63 to 36 and President Biden has signed this bill into law. This law protects Social Security, Medicare, Veterans Benefits and the Defense budget. It also means no debt ceiling battle will be waged until 2025 so as to allow the Presidential campaign free rein without the interference of a debt ceiling battle. I also means that the US government will not default on it's obligations. In other news the job numbers came in far better than expected with actual job created coming in at 339,000 versus 193,000 expected. This bolstered the markets with the Dow gaining over 700 points and the other indices gained ground as well. Today we have ISM numbers and Factory Orders, all of which are Major. Will this be enough to propel the markets forward? As in all things, only time will tell.

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Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.

There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.

In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.