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Fed speak day

USD: Dec '24 is Up at 106.620.

Energies: Dec '24 Crude is Up at 70.14.

Financials: The Dec '24 30 Year T-Bond is Up 2 ticks and trading at 116.20.

Indices: The Dec '24 S&P 500 emini ES contract is 56 ticks Higher and trading at 5950.75.

Gold: The Dec'24 Gold contract is trading Up at 2665.00.

Initial conclusion

This is not a correlated market.  The USD is Up and Crude is Up which is not 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 Higher and Crude is trading Higher 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 with the exception of the Shanghai exchange.  Europe is trading Mixed. 

Possible challenges to traders

  • Unemployment Claims are out at 8:30 AM EST.  This is Major.

  • Philly Fed MFG Index is out at 8:30 AM EST.  This is Major.

  • FOMC Member Hammack Speaks at 8:45 AM EST.  This is Major.

  • Existing Home Sales is out at 10 AM EST.  This is Major.

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

  • Natural Gas Storage is out at 10:30 AM EST.  This is Major.

  • FOMC Member Goolsbee Speaks at 12:25 PM EST.  This is Major.

  • FOMC Member Hammack Speaks at 12:30 PM EST.  This is Major. 

  • FOMC Member Barr Speaks at 4:40 PM EST.  This is not 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 migrated Higher at around 8 AM EST with no economic news pending.  The Dow migrated Lower at the same time.  Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8 AM and the ZT moved 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 12 ticks per contract on this trade.   Each tick is worth $7.625.  Please note: the front month for ZT is Dec and the Dow is now Dec '24.  I've changed the format to filled Candlesticks (not hollow) such that it may be more apparent and visible.

Charts courtesy of Barcharts

Chart

ZT -Dec 2024 - 11/20/24

Chart

Dow - Dec 2024- 11/20/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias and the indices didn't disappoint.  The Dow closed Higher by 160 points, the S&P by 1 but the Nasdaq closed Lower by 21 points.  All in all, a Neutral or Mixed day.  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

Yesterday we had a number of FOMC members speaking and one would think that perhaps they could propel the markets Higher but that was not to be.  Regardless of all the FOMC Member talk the markets finished Mixed with the Nasdaq trading Lower.  Today we have more economic news than we've seen all week, so time will tell if this serves to propel the markets Higher.

Author

Nick Mastrandrea

Nick Mastrandrea

Market Tea Leaves

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