US Dollar: Dec '21 USD is Up at 93.930.
Energies: Dec '21 Crude is Down at 83.49.
Financials: The Dec '21 30 Year bond is Up 18 ticks and trading at 159.17.
Indices: The Dec '21 S&P 500 Emini ES contract is 22 ticks Lower and trading at 4560.00.
Gold: The Dec'21 Gold contract is trading Down at 1788.70. Gold is 46 ticks Lower than its close.
This is not a correlated market. The dollar is Up and Crude is Down which is 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 Lower and Crude is trading Lower 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. Currently, all of Asia is trading Lower with the exception of the Singapore exchange which is fractionally Higher. All of Europe is trading Lower at this time.
Possible challenges to traders today
Durable Goods Orders is out at 8:30 AM EST. This is Major.
Core Durable Goods is out at 8:30 AM EST. This is Major.
Goods Trade Balance is out at 8:30 AM EST. This is Major.
Prelim Wholesale Inventories is out at 8:30 AM EST. Major.
Crude Oil Inventories is out at 10:30 AM EST. This is Major.
Traders, please note that we've changed the Bond instrument from the 30 years (ZB) to the 10 years (ZN). They work exactly the same.
We've elected to switch gears a bit and show a 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.
Yesterday the ZN made its move at around 8:30 AM EST. The ZN hit a High at around that time and the S&P moved Higher. If you look at the charts below ZN gave a signal at around 8:30 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. ZN hit a High at around 8:30 AM EST and the S&P was moving Higher 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 Shorting 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 '21. The S&P contract is now Dec '21 as well. I've changed the format to Renko bars such that they may be more apparent and visible.
Charts Courtesy of MultiCharts built on an AMP platform
ZN - Dec 2021 - 10/26/21
S&P - Dec 2021 - 10/26/21
Yesterday we gave the markets an Upside bias as most of the instruments we use for Market Correlation were positioned properly (the exception being the 30-year bond. The Dow traded Higher by 16 points and the other indices gained ground as well. Today we aren't dealing with a correlated market and our bias is to the Downside.
Could this change? Of Course. Remember anything can happen in a volatile market.
Yesterday we did see more in the way of correlation Tuesday morning as most of the instruments we use for Market Correlation purposes were positioned correctly with the exception being the 30-year bond. The economic news reported really set the tone as Richmond Mfg Index, Consumer Confidence, and New Home Sales all beat and exceeded expectations. Whereas it wasn't much of an upside day it did gain ground. Today we have Durable and Core Durable Goods as well as Goods Trade Balance. These are major and proven market movers.
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.