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.

At this time Asia is trading Mixed with half the exchanges Higher and the other half Lower. Currently all of Europe is trading Higher.

Possible Challenges To Traders Today

Philly Fed Manufacturing Index is out at 8:30 AM EST. This is major.
Building Permits is out at 8:30 AM. This is major.
Housing Starts is out at 8:30 AM EST. This is major.
Unemployment Claims is out at 8:30 AM EST. This is major.
Industrial Production m/m is out at 9:15 AM EST. This is major.
Capacity Utilization Rate is out at 9:15 AM EST. This is major.
Natural Gas Storage is out at 10:30 AM EST. This is major.
Crude Oil Inventories is out at 11 AM EST. This is major.
FOMC Member Bowman Speaks at 2 PM EST. This is major.
FOMC Member Evans Speaks at 2 PM EST. This is major.
Federal Budget Balance is out at 2 PM EST. This is major.
FOMC Member Williams Speaks at 4:20 PM. No impact on session.

Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) 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 liken to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZB made a major move at around 9 AM EST. The ZB hit a Low at around that time and the S&P hit a High. If you look at the charts below ZB gave a signal at around 9 AM EST and the S&P was moving Lower at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a Low at around 9 AM and the S&P was moving Lower at the same time. 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 30 year bond, as a trader you could have netted about 15 ticks per contract on this trade. Each tick is worth $31.25. Please note: the front month for the ZB is now December. The S&P contract is now at December as well and I've changed the format to Renko bars such that it may be more apparent and visible.

Charts Courtesy of MultiCharts built on an AMP platform.

Bias

Yesterday we gave the markets a Downside bias as both the USD and the Bonds were trading Higher yesterday morning and this is generally indicative of an Upside Day. The markets didn't disappoint as the Dow gained 237 points and the other indices gained ground as well. Today we aren't dealing with a correlated market and our bias is Neutral.

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

Commentary

Yesterday morning reading the market tea leaves wasn't as easy as we would like as the USD flip flopped between negative and positive territory. Ordinarily we would like to see clear signs of correlation but yesterday it wasn't that clear. We did believe that the USD would lose ground (as it eventually did). Today we have about 12 major economic reports with three FOMC members speaking so today will have its own set of challenges. From our point of view we will just stick to our rules of market correlation that has served us well.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.