Fed governor spills the beans

USD: Sept '25 is Down at 97.955.  

Energies: Aug '25 Crude is Down at 66.99.

Financials: The Sep '25 30 Year T-Bond is Higher by 25 ticks and trading at 113.07.

Indices: The Sep '25 S&P 500 emini ES contract is 56 ticks Higher and trading at 6348.75.

Gold: The Aug'25 Gold contract is trading Up at 3371.90.

Initial conclusion

This is not a correlated market.  The USD is Down and Crude is Down which is not normal, but 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 Higher and Crude is trading Lower which is 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. Asia traded Higher except the Nikkei exchange.  All of Europe is trading Lower.

Possible challenges to traders

• CB Leading Index m/m is out at 10 AM EST.  This is Major.

• Lack of major economic news.

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 various reports pending.  The Dow dived Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow dived Lower at 8:30 AM EST and the ZT climbed Higher 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 about 20 plus ticks per contract on this trade.   Each tick is worth $6.25.  Please note: the front month for ZT is now Sep '25 and the Dow is now Sep '25.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of BarCharts

ZT -Sep 25 - 7/18/25

Dow - Sep 2025- 7/18/25

Bias

On Friday we gave the markets an Upside bias as the markets were poised to go Higher on Friday, but the indices fell (except the Nasdaq).  The Dow dropped 142 points, the S&P fell by 1 point, but the Nasdaq gained 10 on the session. Today we aren't dealing with a correlated market, and our bias is Neutral or Mixed.

Could this change? Of Course. Remember anything can happen in a volatile market.

Commentary

So the markets were poised to go Higher on Friday but then an obscure Fed governor decided to step in and claim that a July rate cut is in order.  Not only that but he basically announced to El Presidente (Trump) that he was the man to replace Fed Chair Powell.  I've seen such public horn blowing in my life and I've spent close to 40 years in corporate America.  Unfortunately, El Presidente will buy into that and appoint this stooge.  Upon hearing all this the markets did an about face and nosedived. Want to learn Market Correlation and determine market direction hours before the Opening Bell?