Nick Mastrandrea
Market Tea Leaves
US Dollar: Dec '20 USD Down at 92.305.
Energies: Apr'21 Crude is Down at 59.12.
Financials: The June '21 30 year bond is Up 6 ticks and trading at 156.23.
Indices: The Mar'21 S&P 500 emini ES contract is 2 ticks Higher and trading at 4064.50.
Gold: The June'21 Gold contract is trading Down at 1738.00. Gold is 50 ticks Lower than its close.
Initial conclusion
This is not a correlated market. The dollar is Down- and Crude is Down- which is not normal and the 30 year Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The S&P is Higher and Crude is trading Lower which is 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. Asia is trading Mixed at the present time. Currently, all of Europe is trading Mixed as well.
Possible challenges to traders today
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Trade Balance is out at 8:30 AM EST. This is Major.
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FOMC Member Evans Speaks at 9 AM EST. This is Major.
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Crude Oil Inventories is out at 10:30 AM EST. This is Major.
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FOMC Member Barkin Speaks at 12 noon EST. This is Major.
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FOMC Meeting Minutes is out at 2 PM EST. This is Major.
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Consumer Credit m/m is out at 3 PM EST. This is Major.
Bias
Yesterday we gave the markets a Downside bias as we didn't see much evidence for an Upside day yesterday. The USD, Bonds, Gold and Crude were all pointed Higher Tuesday morning and this does not bode well for an Upside day hence our bias was to the Downside. The markets didn't disappoint as the Dow dropped 97 points and the other indices lost ground as well. 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 just about all the instruments that we use for market correlation purposes were pointed Higher and that doesn't bode well for an Upside day. The markets did lose ground but fortunately didn't drop precipitately. The Dow lost 97 points, the S&P dropped 4 and the Nasdaq lost 7. Whereas this isn't much (fortunately), Down is Down and if you are looking at it from a direction perspective the markets did drop. Today we have a couple of FOMC Members speaking as well as Consumer Credit and Crude Oil inventories.
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.
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Focus on April PMIs today
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