This is not a correlated market. The USD is Up and Crude is Down which is normal, and the 30 Year T-Bond is trading Higher. The Financials should always correlate with the US dollar such that if the dollar is Higher, then the bonds should follow and vice-versa. The S&P is Lower and Crude is trading Lower which is not correlated. Gold is trading Higher which is not 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 traded Lower except the Indian Sensex. Currently all of Europe is trading Higher.

Possible challenges to traders

Final MFG PMI is out at 9:45 AM EST. This is Major.
ISM MFG PMI is out at 10 AM EST. This is Major.
ISM MFG Prices is out at 10 AM EST. This is Major.
FOMC Member Bostic Speaks at 12:30 PM EST. This is Major.

Traders, please note that we've changed the Bond instrument from the 10 Year (ZN) to the 2 Year (ZT). They work exactly the same.

We've elected to switch gears a bit and show correlation between the 2-year Treasury notes (ZT) and the S&P futures contract. The YM contract is the Dow Jones Industrial Average, 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 ZT climbed Higher at around 8:30 AM EST with no real economic reports. The Dow dived Lower at around the same time. Look at the charts below and you'll see a pattern for both assets. The ZT climbed Higher at around 8:30 AM EST and the Dow dived Lower at around the same time. These charts represent the newest version of Bar Charts, and I've changed the timeframe to a 15-minute chart to display better. This represented a Long opportunity on the 2-year note, as a trader you could have netted a dozen plus ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for the ZT and YM are both Mar '26. I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of barcharts

Bias

On Friday we gave the markets a Neutral or Mixed bias but that was before an announcement was made on the New Fed Chair when Powell steps down in May. The Dow dropped 179 points, and the other indices lost 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.

Commentary

On Friday we discovered who the next Fed Chair is to be assuming that he passes congressional muster (and of course he will). On thing that we know thus far is he's in favor of rate cuts and of course the president will like that.

Author

Nick Mastrandrea

Market Tea Leaves

EUR/USD drops to daily lows near 1.1840 ahead of US data

EUR/USD now comes under further selling pressure, slipping back to the area of daily lows near 1.1840 on Monday. The pair’s daily pullback comes on the back of the continuation of the rebound in the US Dollar as investors keep assessing the “Warsh” trade. Moving forward, markets’ attention is expected to be on the release of the US ISM Manufacturing.

GBP/USD turns negative around 1.3670 on stronger USD

GBP/USD faces some increasing selling pressure, building on recent losses and revisiting the 1.3670 zone at the beginning of the week. Cable’s decline comes in response to the persistent advance in the Greenback while traders have started to shift their focus to the upcoming BoE event.

Gold trims gains, flirts with $4,800 prior to US data

Gold is bouncing off monthly lows near the $4,400 region per troy ounce on Monday. The broader downtrend remains in place, with pressure coming from a firmer US Dollar following Kevin Warsh’s nomination as the next Fed chair.

Crypto Today: Bitcoin, Ethereum, XRP extend correction amid mixed ETF flows, dwindling retail interest

Bitcoin consolidates above $77,000 after plummeting and testing April’s tariff-triggered lows, as investors remain cautious. Ethereum extends losses toward the psychological $2,000 support amid ETF outflows. XRP holds below its April low at $1.61 as futures Open Interest drops to $2.81 billion.

Warsh effect ripples through markets, central banks on deck this week

The first full month of the year is behind us, and, honestly, it has been rather more dramatic than most had anticipated when toasting the New Year. We wrapped up last week with US President Donald Trump announcing his Fed Chair pick.

Bitcoin slips below $75,000 as selling pressure accelerates

Bitcoin (BTC) price falls below the $75,000 mark on Monday, having corrected nearly 11% in the previous week and reaching level not seen in nearly 10 months. Market momentum has clearly turned bearish, with technical indicators pointing to further downside toward the next key support at $70,000.