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.

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.

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.