TRENDING:

GBP/USD

XAU/USD

FOMC day

Nick Mastrandrea Market Tea Leaves

USD: Dec '24 is Down at 106.640.

Energies: Jan '25 Crude is Up at 70.10.

Financials: The Mar '25 30 Year T-Bond is Down 9 ticks and trading at 116.04.

Indices: The Dec '24 S&P 500 emini ES contract is 71 ticks Higher and trading at 6145.00.

Gold: The Feb'25 Gold contract is trading Up at 2664.30.

Initial conclusion

This is not a correlated market. The USD is Down and Crude is Up which is normal, and 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 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 Mixed. All of Europe is trading Higher.

Possible challenges to traders

Building Permits is out at 8:30 AM EST. This is Major.
Current Account is out at 8:30 AM EST. This is Major.
Housing Starts is out at 8:30 AM EST. This is Major.
Crude Oil Inventories is out at 10:30 AM EST. This is Major.
Federal Funds Rate is out at 2 PM EST. This is Major.
FOMC Economic Projections is out at 2 PM EST. This is Major.
FOMC Statement is out at 2 PM EST. This is Major.
FOMC Press Conference starts at 2 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.

Yesterday the ZT migrated Higher at around 8:30 AM EST while awaiting the Retail Sales numbers. The Dow dived Lower at the same time. Look at the charts below and you'll see a pattern for both assets. The Dow moved Lower at 8:30 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 30 ticks per contract on this trade. Each tick is worth $7.625. Please note: the front month for ZT is now Mar '25 and the Dow is still 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

ZT -Mar 2025 - 12/17/24

Dow - Dec 2024- 12/17/24

Bias

Yesterday we gave the markets a Neutral or Mixed bias however the markets migrated Lower. The Dow closed Lower by 268 points and the other indices traded Lower as well. Given that today is FOMC Day, we will maintain a Neutral or Mixed as is out custom.

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

Commentary

Okay so the big day has come and the question on everyone's mind is what will the Fed do regarding interest rates? As it stands right now it doesn't appear as though a Santa Claus rally is in the wind however that could change after 2 PM EST this afternoon. What do I think? I think if the Fed reduces rates, it will be a minimal reduction; probably a quarter point or 25 basis points and the next rate reduction will be in the future. There is far too much uncertainty in this market. Will the President-elect proceed with his proposed tariffs? If so, this will create inflation as prices will increase and as it stands the Fed has not met their stated goal of 2% inflation. We will know after 2 PM what the prevailing winds are.

Author

Nick Mastrandrea

Market Tea Leaves

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD flatlines below 1.1800 ahead of Fed Minutes

EUR/USD struggles to find direction and continues to move sideways below 1.1800 for the second consecutive day on Tuesday as markets remain in holiday mood. Later in the American session, the Federal Reserve will publish the minutes of the December policy meeting.

GBP/USD retreats to 1.3500 area following earlier climb

GBP/USD loses its traction and trades flat on the day near 1.3500 after rising to the 1.3530 area early Tuesday. Trading conditions remain thin ahead of the New Year holiday, limiting the pair's volatility. The Fed will publish December meeting minutes in the late American session.

Gold rebounds toward $4,400 following sharp correction

Gold gathers recovery momentum and advances toward $4,400 on Tuesday after losing more than 4% on Monday. Increased margin requirements on gold and silver futures by the Chicago Mercantile Exchange Group, one of the world’s largest trading floors for commodities, prompted widespread profit-taking and portfolio rebalancing.

Tron steadies as Justin Sun invests $18 million in Tron Inc.

Tron (TRX) trades above $0.2800 at press time on Monday, hovering below the 50-day Exponential Moving Average (EMA) at $0.2859.

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is. Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries (DAT), adoption of AI and tokenization of Real-World-Assets (RWA).