Downward trend continues

US Dollar: Dec '22 USD is Up at 112.485.

Energies: Nov '22 Crude is Up at 82.95.

Financials: The Dec '22 30 Year bond is Up 9 ticks and trading at 126.22.

Indices: The Dec '22 S&P 500 emini ES contract is 19 ticks Higher and trading at 3606.25. 

Gold: The Dec'22 Gold contract is trading Down at 1667.70. Gold is 43 ticks Lower than its close.

Initial conclusion

This is not a correlated market. The dollar is Up, and Crude is Up 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 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. Asia is trading Mixed with half the exchanges Higher and the other half Lower. Currently all of Europe is trading Lower.

Possible challenges to traders today

• Final Manufacturing PMI is out at 9:45 AM EST. This is Major.

• ISM Manufacturing PMI is out at 10 AM EST. Major.

• Construction Spending is out at 10 AM EST. Major

• ISM Manufacturing Prices at 10 AM EST. Major.

• Wards Total Vehicle Sales - All Day, by Brand. Major.

• FOMC Member Williams Speaks at 3:10 PM EST. 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 made its move at around 8:30 AM EST. The ZN hit a Low at around that time and the S&P moved Lower at around the same time.  If you look at the charts below ZN gave a signal at around 8:30 AM and the S&P moved Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. ZN hit a Low at around 8:30 AM and the S&P was moving Lower shortly thereafter. 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 ticks per contract on this trade. Each tick is worth $15.625. Please note: the front month for the ZN is now Dec '22. The S&P contract is also Dec' 22.   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

ZN - Dec 2022 - 09/30/22

S&P - Dec 2022 - 9/30/22

Bias

On Friday we didn't see much in the way of correlation hence the Neutral bias. The markets veered to the Downside as the Dow closed Lower by 500 points and the other indices lost 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

It appears as though the strategy of one day up, next day down didn't work on Friday. If it were true, then Friday should have closed Higher but that didn't happen. As we've stated previously; this strategy will work until it doesn't, and Friday's action proved that. The Dow closed 500 points Lower. Today we have Construction Spending and Total Vehicle sales; both of which are major and proven market movers. Will this be enough to move the markets to the Upside? Only time will tell.