This is not a correlated market. The USD is Up and Crude is Down which is normal, but the 30 Year T-Bond is trading Lower. 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 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. Asia traded Mixed. All of Europe is trading Mixed as well.

Possible challenges to Traders

Fed Chair Powell Speaks at 8:30 AM EST. This is Major.
Richmond Manufacturing Index is out at 10 AM 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.

Yesterday the ZT dived Lower at around 8 AM EST with no reports pending. The Dow climbed Higher at the same time. Look at the charts below and you'll see a pattern for both assets. The Dow climbed Higher at 8 AM EST and the ZT 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 Short opportunity on the 2-year note, as a trader you could have netted about a dozen 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 - 7/21/25

Dow - Sep 2025- 7/21/25

Bias

Yesterday we gave the markets a Neutral or Mixed bias and the markets didn't disappoint. The Dow closed 19 points Lower, but the other indices showed a slight gain. 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 Fed Chair will be speaking at 8:30 AM EST today and yet over the past week we've heard nothing how disappointed El Presidente is with Fed Chair Powell. And why? Because he won't lower interest rates now but wants to wait and view the data. I can only wonder what Trump is thinking of doing but perhaps we'll find at 8:30 AM EST.

Author

Nick Mastrandrea

Market Tea Leaves

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Initial conclusion