Fed raises

Nick Mastrandrea Market Tea Leaves

USD: Sep '26 is Down at 99.935.

Energies: Oct '26 Crude is Down at 101.32.

Financials: The Dec '26 30 Year T-Bond is Higher by 4 ticks and trading at 106.29.

Indices: The Sep '26 S&P 500 emini ES contract is 240 ticks Higher and trading at 7683.25.

Gold: The Dec'26 Gold contract is trading Down at 4348.70.

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 Lower which is not 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 goes Up the other goes Down. All of Asia traded Higher. All of Europe is trading Higher as well.

Possible challenges to traders

Philly Fed MFG Index is out at 8:30 AM EST. Major.
Unemployment Claims are out at 8:30 AM EST. Major.
Building permits are out at 8:30 AM EST. Major.
Housing Starts are out at 8:30 AM EST. Major.
Pending Home Sales m/m are out at 10 AM EST. Major.
Natural Gas Storage is out at 10:30 AM EST. Major.

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 climbed Higher at around 8:30 AM EST with Retail Sales pending. The Dow dropped at around the same time. Look at the charts below and you'll see a pattern for both assets. The ZT climbed at around 8:30 AM EST and the Dow dived Lower 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 a dozen plus ticks per contract on this trade. Each tick is worth $6.25. Please note: the front month for the ZT is now Sep '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

Yesterday we gave the markets a Downside bias as it was FOMC Day and we always maintain a Neutral bias on this day. The Dow shed 630 points, and the other indices lost ground as well. Today our bias is to the Upside.

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

Commentary

So for the first time in three years the Fed has decided to raise rates by a quarter point. This will Want to learn Market Correlation and determine market direction hours before the Opening Bell?

Author

Nick Mastrandrea

Market Tea Leaves

Nick Mastrandrea over 20 years experience in trading and formerly held a NASD Series 7. He currently holds a NJ Life, Health and Variable Authority. Nick is a published writer and his work has appeared in Futures Magazine, TraderPlanet and others.

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