US Dollar: Sept USD Down at 92.920.

Energies: Aug'20 Crude is Up at 40.11.

Financials: The Sept'20 30 year bond is Up 9 ticks and trading at 182.19.

Indices: The Sept S&P 500 emini ES contract is 35 ticks Higher and trading at 3257.50.

Gold: The Aug'20 Gold contract is trading Up at 1994.50 Gold is 275 ticks Higher than its close.

 

Initial Conclusion

This is not a correlated market. The dollar is Down- and Crude is Up+ which is normal but 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 Higher which is not correlated. Gold is trading Higher which is 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 Lower with the exception of the Shanghai exchange which is fractionally Higher. Currently Europe is trading Higher with the exception of the Spanish IBEX which is fractionally Lower.

 

Possible Challenges To Traders Today:

  • Core PCE Price Index m/m is out at 8:30 AM EST. This is Major.

  • Personal Spending m/m is out at 8:30 AM EST. This is Major.

  • Employment Cost Index are out at 8:30 AM EST, This is Major.

  • Personal Income m/m is out at 8:30 AM EST. This is Major.

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

  • Revised UoM Consumer Sentiment is out at 10 AM EST. This is Not Major.

  • Revised UoM Inflation Expectations is out at 10 AM EST. This is Not Major.

 

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 it's move at around 7:15 AM EST. The ZB hit a Low at around that time and the S&P moved Lower. If you look at the charts below ZB gave a signal at around 7:15 AM EST 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. ZB hit a Low at around 7:15 AM EST 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 30 year bond, as a trader you could have netted about a dozen ticks per contract on this trade. Each tick is worth $31.25. Please note: the front month for the ZB is now Sept '20. The S&P contract has been changed to Sept '20. 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.

Tea

Tea

 

Bias

Yesterday we gave the markets a Downside bias as both the USD and the Bonds were trading Higher Thursday morning and this usually represents a Downside day for the indices. The markets didn't disappoint as the Dow dropped 226 points, the S&P fell by 12 but the Nasdaq did gain 45 points. 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

The day after FOMC Day and the markets were mixed as both the Dow and S&P lost ground but the Nasdaq did show some gains. The economic news reported yesterday wasn't stellar and as such the markets did falter. Most notable was Advanced GDP showing a greater than expected decline and first time Unemployment Claims showing 1.4 million new claims. This isn't good by any standard. Of course the politicos in DC will blame each other as is their custom but the fact remains that people are hurting and this squabbling isn't helping the American people. This is is a time that requires bold action but all we get are arguments as to what the extended UI amounts should be. The idea of having a weekly benefit amount of 70% of that person's prior income would be a logistical nightmare unto itself. As someone who spent 30 years in the Technology Industry, we are looking at 50 disparate systems that would have to integrated in order for this to work and at the Federal level a new system would have to be built to accomplish this. By the time that's done we'll be talking about a new, new stimulus package.

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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